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THE NAVIGATOR - Short-Term Correction for U.S. Indices - Emerging Markets Look Lower!

Stock Indices – In this month’s edition of the Elliott Wave Navigator, we begin by taking a more in-depth look at the progress of the benchmark S&P 500 index. Its overall direction remains in focus, especially around the disbelief that this year’s uptrend will continue. Cycles also play a part in discerning the timing of major trends so we’ll be examining those too. In terms of Sector out/underperformance, the U.S. large/small-cap differential is updated along with Financial’s (XLF) performance vs. the S&P 500. In Europe, we examine whether there is justification in using the Six-Swiss Stock Exchange as a safe-haven against the backdrop of a break-up of the European Union ahead of key elections in France. Also, how is Germany’s midcap market expected to perform? Emerging Market indices are looking fragile and are forecast lower over the next several months. How does that affect Brazil and Russia?

Currencies – Short-term currency movements remain complex so we discuss the probabilities of whether the US$ dollar index has already ended its 8-year strengthening cycle or is poised to prolong this for another few months. Commodity-currency trends have the potential to undergo a retracement decline over the next few months within the backdrop of a multi-year advance for the US$/BRL and US$/ZAR.

Interest Rates – U.S. interest rate trends remain firmly within uptrends established from last year’s lows but the reactive declines following the Federal Reserve’s recent rate hike are updated. In Europe, the benchmark Bund yields are trending higher too but with a short-term risk of declines.