Research Summary

The report discusses the bullish trend in US equities, highlighting the continued breakout in major US indices. It also covers easing financial conditions, confirming internals, a bearish consensus, and an N&N Buy Signal. The report further discusses a potential short USD play and other relevant financial data.

Key Takeaways

Bullish Breakout in US Indices

  • Continued Bullish Trend: The report notes that the bullish breakout in major US indices continues, with the Qs now bumping up against their upper weekly Bollinger Band and more than 2std extended from both their 20 and 50-day moving averages. This signifies a strong buying impulse, suggesting a potential pullback/consolidation in the short term.

Easing Financial Conditions

  • Chicago Fed ANFCI: The report highlights the Chicago Fed Adjusted National Financial Conditions Index (ANFCI), which measures risk, leverage, and credit. The index has begun to trend down from its 12m+ range, indicating that financial conditions are at their easiest levels in over a year.

Confirming Internals

  • Market Internals: The report notes that all market internals continue to confirm the bullish thrust. The BofA Bull & Bear reading gave its 5th consecutive buy signal last week, and there were more confirmatory breadth thrusts.

Bearish Consensus

  • BofA Global Fund Manager Survey: The report includes highlights from the latest BofA Global Fund Manager Survey, indicating a bearish consensus among fund managers.

N&N Buy Signal

  • Weekly Nervous and Number Indicator: The report mentions that the Weekly Nervous and Number indicator triggered a 2std low buy signal last week, which has a good record at marking intermediate lows in the market.

Actionable Insights

  • Investigate the Potential: The report suggests investigating the potential of getting long CAD (short USDCAD) as it’s at the top of its 12m sideways range. Positioning for both large and small specs is crowded short, while its 2s and 10s yield spread oscillator is starting to turn up in CAD’s favor.
  • Monitor Inflation Trends: The report cites Simon White’s analysis that inflation is poised to start reheating soon as it becomes structurally embedded. This makes a sustainable rally in bonds unlikely, especially when US recession risk is receding. The report suggests closely tracking this potential.
  • Consider Energy Sector: The report notes that energy is the only sector with positive revisions for both EPS and revenues according to RBC Capital Markets, suggesting a potential opportunity in this sector.

Related Research