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The NAVIGATOR - June 2019 - Stock Markets Set to Resume Lower – Some Pick-Up in Consumer Staples (XLP) & Utilities (XLU) Sectors – Technology (XLK) Set to Decline Rapidly – US$ Dollar to Accelerate Higher – Stl

The U.S./China trade negotiations took a turn for the worse over the last couple of weeks which had obvious knock-on effects for global stock markets. May’s initial downswing in benchmark indices including the S&P 500 have developed into typical Elliott Wave impulse patterns, containing five wave structures. That means we can expect more downside continuity over the coming weeks. But just how far can these declines go? This month’s EW-Navigator answers this by measuring the initial decline with Fib-Price-Ratio analysis combined with some very interesting wave counts for China’s Shanghai Composite index. The results could surprise! Cycle analysis projects the next significant lows next September, which also provides some clues to the duration of this corrective downswing. U.S. Sector analysis highlights a couple of key ‘defensive’ indices/ETF’s which are expected to outperform during this next downturn. We’re assessing these through some interesting spread analysis + Elliott Wave overlay. The downturn also highlights underperformance in Technology, but no surprises there!

In this month’s currency section, we take a look at the latest US$ dollar positioning using the latest COT data – also, how currency volatility declined to lows not seen since late-2014! The JPMorgan global FX volatility index measure is currently around 9.0 and it’s seldom fallen below 7.0, the last time was in 2007 and before that, in 1996. On each previous occasion, the US$ dollar strengthened around 10% per cent or more, shortly afterwards. But does that correlate to the current Elliott Wave counts? Timing is important of course, so this month’s analysis takes a look at the key price levels across the US$ dollar index, the Euro/US$ and other members of the G10 to see if such a dollar advance can begin immediately, or delayed for a few weeks.

Interest rates have declined so far this year but is that likely to continue? This month’s EW-Navigator report focuses on European rates, specifically, the progress of the benchmark DE10yr yield which is not that far above historical lows set back in July ’16 at -0.206% and what to expect from Italy’s ITY10yr yields ahead of EU elections and the populist demands to break-away from the austerity-limiting spending-budgets imposed by Brussels.