WEIGHING IT OUT - And there she goes. So AUDNZD has continued lower and looks like it will drop back down to the next big support area around 1.0500, with any rallies to now be well capped ahead of 1.0700. We stepped aside last week but will most definitely be getting involved again on a dip to 1.0500. The trade continues to be there and that longer-term bottom is as pretty looking as it's ever been. Elsewhere, the Dollar has come under some more pressure and this hasn't been a help to the GBPUSD short, which has been compromised as a consequence. I have a hard time seeing the Dollar continue to get slammed in 2018, though if we look at that EURUSD chart, there has always been scope for one more little move up to challenge that massive falling trend line off the record high from 2008, which comes in just over 1.2600. So while I continue to expect the Buck to start to run back up again, we can't ignore the monthly chart that shows room for a little more Dollar weakness.
WHAT GOES UP.... - I don't think we're even close to seeing the bottom in the stock market here and I believe this drop will conservatively add up to about 25% off the record high from January. While the market has been obsessed with assigning the risk liquidation to US protectionism, this is nothing more than what could be any number of catalysts for the drop. The bottom line here is that whatever the case, the stock market is at risk for a much bigger drop as monetary policy normalizations ramp up in 2018. If moving rates down fuels record moves in stocks, it stands to reason that the process by which rates are pushed back up should weigh on stocks. It's really as simple as that. Remember, rates were moved down so aggressively post 2008 crisis that stocks became the only game in town. So now there are other asset classes that are tremendously undervalued as a consequence and this should lead to a mass exodus from the overcrowded and overextended equities market.