Mid-Week Update

June 19, 2024

The ferocity of the equity bull is claiming some victims. This is pretty evident as to how the indices trade. While we have seen some early indications that the latest push higher is seeing exhaustion, we are now awaiting the reversal signal to fire some sell signals (see further below).

Before I go through the latest set-ups and alerts, here is a quick thought update from Macro D on his latest thoughts. Enjoy.

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Where do we come from? The euro has left the post-European election week in precarious conditions, below 1.07 against the US dollar and below 0.96 against the Swiss franc. Given the tangled scenario for Europe, the Swiss franc and the dollar have prevailed as haven currencies. As for the bond market, the tension is expected to continue, aided by the political/economic context that is shaking France to its foundations.

And how did we start the week?

Philip Lane (the ECB's chief economist) stated that 1) the impact of the interest rate hike has yet to be felt on the economy and 2) the activation of the TPI, the so-called ECB anti-spread shield, will not be necessary since the movements on the bond market (we are referring to the delicate situation that has arisen in France) are part of a repricing movement that Lane defines as orderly.

We'll see.

After last week's missteps, Wall Street has started breaking records again (as far as the S&P 500 is concerned, even the Dow Jones and Nasdaq have raised their voices). It has not been influenced at all, even by the president of the Philadelphia Fed (Patrick Harker), who stated that he only expects a cut in interest rates by the end of the year. On the currency market, the yen's intentions for this week are those who want to float while waiting for the discussion regarding the BOJ's purchases of government bonds to be clarified. The pound appears to be in a nervous phase that precedes a movement of a certain level, but it is unclear whether this movement will be oriented towards the stars or the underworld. The Reserve Bank of Australia has kept rates steady at 4.35%. What do we get from this choice? For the Australian Monetary Policy Committee, inflation still represents a risk that must be monitored, given that reaching the objective target is still far away.

Source: Bloomberg

Based on the RBA’s statements, we can get the idea of ​​an approach oriented towards raising rates rather than cutting rates.

And now let's get a few things out of the way that we didn't give a hearing to in last week's Friday Chart Book.

Let’s go.