Research Summary

The report discusses the current market trends, focusing on the high-trend fragility and supportive long-term positioning. It highlights the potential dangers in record-low correlations, a bullish breakout in AUDUSD and the Nikkei, and provides an analysis of BTC and a PGM pitch. The report also mentions the performance of Sibanye-Stillwater LTD (SBSW), a large PGM play.

Key Takeaways

Market Trend Analysis

  • Continued Upward Trend: The report emphasizes that the market trend remains upward, despite potential dangers lurking in record-low correlations.
  • Market Internals: The Market Internals Aggregator has not triggered a sell signal, and the LQD/IEF continues to chop above the red zone, indicating a stable market condition.

Trend Fragility and Sentiment/Positioning

  • Trend Fragility: The Trend Fragility indicator, a composite of short-term sentiment and positioning data, crossed above 90% last week, signaling caution. High-trend fragility is a condition but not a catalyst for a top.
  • Long-term Sentiment/Positioning: The BofA Bull & Bear indicator, a gauge of longer-term sentiment/positioning, is hardly above neutral, suggesting that the primary trend has room to run before the conditions are set for a broader top.

Currency and Stock Market Analysis

  • AUDUSD Breakout: AUDUSD broke out to the upside of its 1 ½ month rectangle pattern, indicating a bullish trend.
  • Nikkei’s Performance: The Nikkei saw a new weekly closing high last Friday, suggesting potential bullish follow-through over the coming days and weeks.

Cryptocurrency Analysis

  • Bitcoin and Ethereum Performance: Both BTC and ETH have been underperforming for the past few weeks, despite their strong historical correlation to the Qs, which are at all-time highs. The sentiment backdrop has finally reset with Sentix’s TD Index falling into buy territory.

PGM Market Analysis

  • Sibanye-Stillwater LTD (SBSW) Performance: The report highlights the performance of Sibanye-Stillwater LTD (SBSW), a large PGM play, which is approaching all-time lows in what is likely a cyclical bottom in its end markets. The company has a robust cash flow and an asset base worth ~30x the current market price.

Actionable Insights

  • Monitor Market Trends: Given the high-trend fragility, it is crucial to pay closer attention to the market internals and the tape to anticipate potential market shifts.
  • Assess Currency Market Movements: The bullish breakout in AUDUSD and the performance of the Nikkei suggest potential investment opportunities in these markets.
  • Watch Cryptocurrency Performance: The underperformance of BTC and ETH, despite their strong historical correlation to the Qs, suggests a need for further analysis and monitoring of these cryptocurrencies.
  • Consider PGM Market: The performance of Sibanye-Stillwater LTD (SBSW) and the potential cyclical bottom in its end markets suggest that the PGM market may be worth exploring for potential investment opportunities.

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