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Vermilion Macro Vision: U.S. Equity Strategy

Headlines prior to Hurricane Matthew foretold extreme damage. For those of us on Wall Street whose job it is to decipher the beneficiaries from such chaos in the form of equity price moves, there was little fanfare. The damage was far less than what the headlines from “experts” had predicted, and investors went about their business looking for the next headline that would stoke the next investment opportunity. October 11th we released our own storm warning, highlighting the potential diamond pattern on the S&P 500 chart. It is often the case that patterns such as these resolve themselves in an explosive manner in the direction of which they break out. And, in most cases they exhibit powerful moves, typically double-digit percentages. Our particular diamond broke the uptrend at the 2144 level, and we indicated support came in at the 2114 level. Over the last several weeks the index was confined to a very narrow trading range and eventually broke to the downside of the 2114 level. However, as technicians, we always use a filter of 2-3% and/or a period of 2-3 days to declare that the violation is valid. In the most recent case, the FBI indicated on Sunday that it was, once again, removing the uncertainty regarding Hillary's email scandal. Markets are rallying globally, and the U.S. dollar is strong. Today's action will likely dictate the resolution of our precious diamond pattern (see attached document for complete U.S. strategy thoughts and recommendations).

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