A turbulent week with a upside bias ahead?

The Euro is getting ready for some Vola. Bear mind mind that we have not seen the final top in the RRM Indicator, meaning we only know it will com soon but not when...

 The TimeCycles paint an optimistic picture for the risk trade....

 ...The gold miners might need another retest but seem on path to a more sustained rally....

 ....against the backdrop of Gold...

 ....the SEMIs also want to see another week of sun....

 ...Oil being the big looser the last weeks is getting ready for a fight back against the bears...

 ...which is in line with what we see with the Materials sector.

A muddy picture out there painting some rally in the risk trade which probably will not be sustainable with a safehaven like Gold entereing into the next bull phase.....the smell of moneyprinting is in the air and plenty of bail out attempts!

Weekly Trend update: The Bounce could continue

The Euro could see some upside Momentum......but should see it fast...

 Gold is still positive...

 Small Caps seem to have the wind in their back....

 ....but Silver looks precarious..

 ...while OIL looks ready to recoup some of the losses.

All in all we could see some further choppy actio with an upside bias.

How much air is left in the rally

Let me introduce our OptionsFlowExtreme Gage, which we have been experiementing with for some time.

It measures the amount of extreme Money Flow events withing our Institutional Portfolio from a pure Options perspective. You  add some filtering and adjustments and ..voila ...this is the result!

Observations:

• 11 out 11 spikes led to a bullish outcome over a period of 1-2 m (months)
• only 2 rally were shortlived or died too early
• 2 out 9 saw a deeper low before seeing the rally to gain strength

• the last spike was in mid May which projects out to mid June to mid July or even August
• the last spike was not a big one, indicating that this trading low in May was probably not the medium term cycle LOW

VixOsc defends the positive posture

...not more than a early ray of hope, but that's how it always starts. We certainly need more confirmation that this first flower gets not pulled out again.

Breadth has turned up

Breadth  (Institutional Portfolio) turning up is a healthy confirmation that the bounce might  continue.

Crossroads ?

Was this last night the wash out, the final spasm down, the cleansing...or...

the end of the Bounce?

We should know soon.

Bear in mind that if we break from here we should break hard given how bearish the overall PUBLIC OPINION is. Gold and Silver retested their Lows, whereby OIL got hammered and Equities have NOT decided yet.

The overall technical picture still sees a greater likelyhood for the continued , volatile bounce for at least another month and remember VOLATILITY we promised......

JPM, MS, GS all expect lots of Volatility!

Vola can go both ways although a bounce seems more probable ....let's see

Crude is also getting ready for bounce

To go long Volatility in Oil has not been as promising as this in a while....

..in a commoditiy that faces an extreme bearish sentiment (Public Opinion) and where the TREND has turned up.

Aussie and Euro are in position for a bounce

So once again the world has been saved and the AUSSIE and the EURO seem in a good position.

TimeCycles of the AUSSIE cry bull....

...after being exhausted and being shorted by the large Speculators (see Commitment of trade report).

 The EURO Trend has flipped up....

 ...also in a very exhausted state.

.....let the Summer-Bounce begin ( and ignore the 7.20 on the Spanish 10 yrs)

So far nothing more than a DEAD CAT BOUNCE...

The CRB Commodities Index hints at a good trade

The CRB faces triple capitulation:

1. Public Opinion is as bad as in 11/2008 when the CRB bottomed during the crisis
2. Weekly Exhaustion has reached an Oversold level
3. Daily Exhaustion has reached a downside extreme

Opportunity:

• If the Weekly Exh. Index can turn around at this stage then we could see a up to 200% rally in the CRB
• The Daily Exh. Index needs to avoid an evolving divergence as sign of a protracted bottoming

The Canary is singing louder !!

Risk Reward Multiples for combined Call & Put Spread strategies:

Remember our Canary Signal 10 days ago ? The Canary is singing louder and louder and wants to fly that at least shows us the historic analysis of hedged Option Strategies ('going long Vola'!) where you buy a Call & Put Spread and in this case on a key financial name like Morgan Stanley......

By the way we see the same for OIL, JPM, EWZ (Brasil) which seems like the play of choice for the Hedgies to play the summer and also in  FXI, WMT, XLF....

Weekly Trend & Cycles update

The broader Indices are not convinced yet and feel like as if they need another re-test, but that might be yesterday's news after Spain's salvation.

 The Euro is getting ready for a nice bounce....

 ...and so seem the Chinese Stocks...

 ...also Gold wants to join the party...

 ...whereby the 20yr Treasury looks vulnerable...

 ...against confident Materials that want to rally!

ALL in ALL we are either already there yet or are getting close for the Summer.

Constructive Action towards a Low

THE CBOE & ISE Equity Put/Call ratios have their spikes downwards behind them and await another retest for confirmation.

 Our Vix TR (TrueValue) Indicator confirms the above....

 .....but the VisOSC has still not entered the positive ZONE.

The twin indicator our VixOSC2 in the Summation version (if VixOSC turns negative => the Summation Index turns down...) gives another insight that a final retest seems in  the cards or at least possible against the backdrop of a more bullish multi-week picture.

(Pls be informed that there will be no postings next weekend to to private engagements)

Which path will the Summer-Rally take ?

Looking at the overall Sentiment picture we should expect the Rally to last some weeks (months) which also seems in line with the extreme excesses we observe with the DXY (Dollar Index) and the Bonds. What seems unclear at this stage is whether we need another retest of the LOW or another downside exhaustion a.k.a. capitulation. Mid June still looks like a good date for a re-test of the LOW.

Key for a more medium-term rally has to be a recapturing of the positive zone of our VixOSC ('THE HORSE'). An upside break followed by a re-test could cement the bull for more upside. The opposite is true as well, where we see a unconvincing upside break and a failed retest that would set us up for some brear action into the fall.

The Workhorse has been doing a solid job in over a decade

VixOSC has always been the compass we designed it to be. 2 material cyclical bears stress-tested the 'HORSE' and it still is offering a solid passage for the Horseman.

The 'HORSE' like to work with the SPY, QQQ, the Banking Sector and the VXX which should be no surprise given the high correlation btw. those groups.

What would a Summer-Rally imply for BONDS

Bonds looks prone for a correction, unless ARMAGEDDON happens now and rate go to zero. The Trend and Sentiment picture does NOT support that view.

If we assume some correction for the Bond sector then we can assume a SUMMER-RALLY for stocks. Pls find below a simplified trading model on Bonds (Net Asset Val-curve in blue in the center) with trading signals coming from our workhorse Indicator the VixOSC.

Euro gets in Position for the Summer-Rally

Observations:

• Positive Divergence in our TREND Model (aggregate of Sentiment, Flow and Momo Indicators) for FXE (Euro ETF) that has at least stopped further damage the last 3 times
• Public Opinion shows a significant low

The Summer-Rally is shaping up

This all needs to be seen in the bigger context of our mid June bottoming window that could allow for some nice weeks/(months) in the sun of hope during the summer when it feels like as if we the political class has found a path to resolution.

Mid June could end the current downdraft

Timing looks prone for a mid June landing....

The 20 yr Treasury could move even lower given the tendency for the TLT to go for a-b double moves.

Our leading Materials sector indicates a landing in sight in the context of a bear market !

Final exhaustive Move for the interim Bottom ?