Inflection And Reflection
The market is evenly balanced
As markets closed the quarter on the Easter weekend, they remain at a major inflection curiously both volatile and stable following aggressive trends reversal and consolidations.
This weekend could prove pivotal within the major inflection point. The same was true for the start of the quarter when we forecast “seemingly exponential strength at the start of the year will fade for a pivotal consolidation in an approximate 2500-2820 SPX and 23,500-26500 DJIA range”. Holidays are frequently a time for sentiment to shift as investors, funds and traders reflect, take stock of what has happened and their views and intentions for the next quarter. Month or quarter end are also important as there are significant extraordinary flows for accounting reasons: profit and loss and rebalancing requirements for both stocks and currencies. Quarter end is more noteworthy as some funds do not rebalance monthly. This is reflected our Quarter End Fractal that projected Thursday’s ramp.
The effect month or quarter end has on currencies is frequently related to stocks. Month-end rebalancing for Forex is where foreign investors in US assets sell the USD to bring the value of their hedges back in line with increased asset values typically until 16GMT the valuation cut off point. When the US market has outperformed other markets the size of this flow should be much be higher than US investors’ needs to buy USD to also increase the value of their foreign hedges. However when the US market has underperformed such as the last two months this leads to USD buying and selling of all other currencies.
Whether these influences and fractals remain in force this week remains to be seen. With event risk extended through the Easter Break, the stock sell off into the close was predictable. With trading volumes depressed on Monday, the week and the major inflection will probably on really resume on Tuesday. Markets are fragile and traders are both nervous and confused as reflected by our Twitter sentiment poll on Wednesday.
A lack of decisiveness or extreme sentiment suggests the market is still subject to heightened two way volatility before during and after the major inflection is resolved…whether it is from another Trump ‘grenade’ or not.
This weekend we have reviewed all the 3 monthly outlooks for the different instruments we cover. The results – to be published on our our analysis pages In the next 48 hours – show that many of our views are unchanged for the next quarter and that there will be plenty of volatility and trading opportunities.
There are plenty of big fish to be caught in this sea.. hook line and sinker..
Here’s to making the very best of them.
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