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The EW-Navigator - U.S./European Stock Indices continue lower into late-September – EM/China indices to Underperform – XLP & XLU remain Defensive Strategies – US$ dollar at Crossroad Awaiting Break-Out

In This Edition:        

The U.S./China trade negotiations have deteriorated over the last month which is affecting the entire global economy. The IMF have issued repeated warnings of a global meltdown should trade negotiations falter whilst the latest Reuters polls show pessimistic sentiment is adding to the bearish mood. In its July sensor, Reuters asked 250 economists their expectations – 70% per cent project global growth to slow further with recession risks increasing – that was a jump from 50% per cent just a few months previously. August’s later poll showed economists’ expectations of a recession rising from 35% per cent to 45% per cent within the next two-year period. But is this increased pessimism merited? – or is this just another case of swinging sentiment extremes? This month’s report lifts the veil and reveals the markets true intent by locating price development within the stock market’s current Elliott Wave corrective pattern. Analysis includes an update of the secular-bull uptrend and the more recent decline that began from the May/July highs together with cycle analysis. We also update several U.S. sectors, spread analysis and updates for Europe, EM’s and China.

Currencies are at important junctures right now, particularly the US$ dollar index. The entire counter-trend upswing that began in 2018 is approaching completion but when does it end and at what levels? This month’s report highlights critical levels in the US$ dollar index and Euro/US$ as benchmarks for the entire currency world – this is complimented with cycle analysis and an update of the dollar’s 7.8-year downtrend.

Interest rates have featured over the last couple of months as treasury yields have collapsed lower as the Federal Reserve bring a halt to its monetary tightening programme. Can the US10yr yield follow the US30yr yield and break to new historical lows before year-end, or will there be an abrupt directional change beforehand? This month’s report takes a look at the Elliott Wave progress of ten-year yields, the US02-US10yr spread but also features an update for European DE10yr bund yields alongside the pattern development for Italy’s ITY10yr yield.