Getting Exciting - And to think US equity markets are still tracking in overbought territory on the the monthly charts. Yet another SPX topside failure ahead of 1900 could be warning of the onset of highly anticipated correction in US equities, and I would be looking for a break and daily close below 1850 to confirm. Everything in FX feels as though it could be lining up, with EUR/CHF coming back under pressure, USD/JPY attempting to break to fresh yearly lows, and emerging markets and other risk correlated currencies coming back under some pressure. All of this makes for an interesting time ahead and could be a very welcome development for the lifeless currency markets that have shown no signs of volatility in recent months.
Time to Free Em Up - So what's going on out there? Well, it is the same thing I have been preaching all year. It all comes down to the Fed and market expectations for Fed policy reversal. Fed policy hijacked the financial markets over the past several years, and it will take the removal of such policy to free up the markets again. And we are finally seeing signs of such a reversal, with unemployment dipping back below 6.5% and inflation ticking up. The Fed doesn't have much room left to maneuver and it looks as though it will be forced to act sooner than later. This translates into more USD demand on an expected narrowing in yield differentials in favour of the buck and a liquidation in risk assets that have been attractive in the face of the free money Fed policy. Hold onto your hats, it could get real exciting real fast. Let's see.