XLK, XLY, XLE, XLF, XLP, STLG, USD, EUR, CAD, AUD XLK, XLY, XLP, USD, EUR, STLG, YEN, SP500, Nikkei, Shanghai Composite

The Navigator - Eurostoxx Banks turn Positive! - Energy Sector on Watch! US$ Dollar Begins Modest Recovery!

Analysis begins with an overview of the main U.S. and European Stock Index trends and its location within the secular-bull uptrend. One interesting chart that has surfaced from our portfolio of comparison analogues is the positive-correlation between the EuroStoxx Banks index and the US10yr Treasury Yield. The former is identified as ending a horizontal flat (consolidation) pattern that began last May, so this is preparing its next stage of the medium-term uptrend. Such a bullish condition can be translated into the same outlook for the US10yr yield (uptrend) and of course, the major stock indices.

This report also updates all the 10 leading U.S. sectors vs. the benchmark S&P 500 index. Underperformance (vs. S&P) looks set to continue in the Consumer Discretionary (XLY) and Consumer Staples (XLP) sectors and perhaps Materials (XLB). This also extends to the Technology (XLK) and Utilities (XLU) sectors too. The only ‘up’ arrow indicating outperformance is the Energy (XLE) sector – the others remain neutral despite recent outperformance, Financials (XLF), Healthcare (XLV), Industrials (XLI) and Real Estate (XLRE).

Our currency portfolio has been entirely revamped following the mid-Year video updates although many forecasts remain unchanged. The US$ dollar remains locked into its downtrend from January’s high and although latest readings show it is equaling the net-speculative short-positioning last seen in year-2011, the current downtrend remains incomplete. Despite this, we examine the possibilities of a shorter-term bounce against the major currency pairs.

Interest rates are on the rise again. We refer back to the Eurostoxx Banks vs. US10yr Yield analogue which confirms yields ended important multi-month corrections into the early-September lows. The next Elliott Wave pattern development and upside targets are largely drawn from expectations in the US10yr-DE10yr Yield Spread analysis – this is also updated along with the benchmark German DE10yr Yield outlook.

28 pages

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