Research Summary
The report discusses the current market trends, focusing on the bullish sentiment, the record highs in Japan’s Nikkei, a potential long DAX trade, and an opportunity to add to long BTCUSD positions. It also highlights the market’s trifecta and the supportive market internals for the primary uptrend.
Key Takeaways
Nikkei’s Record Highs
- Historic Milestone: Japan’s Nikkei index has reached new all-time highs, the first in 34 years. The report suggests that such highs tend to cluster, indicating the possibility of more record highs in the future.
- Overbought Conditions: The Nikkei is currently overbought at roughly +3.5 standard deviations above its 200-day moving average and +2 standard deviations above both its 50 and 20-day moving averages. However, the report notes that overbought markets often become more overbought, indicating accelerating momentum rather than a precursor to mean reversion.
Market Trifecta and Bullish Sentiment
- Market Trifecta: The report discusses the market’s trifecta, arguing that the weight of the evidence still favors the bulls. The Qs are trading in a short-term volatile sideways range within a broader uptrend, now in a Bull Volatile SQN regime.
- Bullish Sentiment: The sentiment in the market is bullish, but not consensus enough for a top call. The report suggests that any selloff is likely to be short-lived until broader weakness across the internals is observed.
Long DAX Trade and BTCUSD Position
- Long DAX Trade: The German DAX broke out of its sideways trading range this past week. Bank of America expects “producer” indices like the DAX to perform well as they anticipate the ISM to begin inflecting higher in the months ahead.
- BTCUSD Position: The report highlights a potential opportunity to add to long BTCUSD positions. Bitcoin is currently consolidating in a tight sideways compression, and a bullish breakout is expected soon.
Actionable Insights
- Monitor the Nikkei: Given the Nikkei’s record highs and overbought conditions, it may be beneficial to keep a close eye on this market for potential investment opportunities.
- Consider the Market’s Trifecta: The current market trifecta and bullish sentiment suggest that investors might want to maintain or increase their exposure to equities.
- Explore Long DAX Trade: With the DAX breaking out of its sideways trading range and expectations of an upward inflection in the ISM, investors might want to consider a long DAX trade.
- Assess BTCUSD Position: Given the expected bullish breakout in Bitcoin, investors might want to consider adding to their long BTCUSD positions.
