The Mars Market Update — Live Research

Last week saw multiple equity markets top out in 5 waves from the March lows and reverse sharply lower. We are looking for a 3 wave correction before a resumption of the bigger picture uptrend. This decline is likely wave (a) of an a-b-c correction targeting 38.2%-61.8% fib support of the March rally. We are neutral bonds and the US dollar from a big picture perspective. Near term, we should see a continued correction of global equity indices, risk-off bid for the US dollar, gold and bonds....

Last week, global equities declined from measured resistance but failed to break meaningful support. So far, the equity rally is in 3 waves - any trade above the wave (c) highs will change the rally into a 5 wave impulse - this is important! Any near term push to new cycle highs will indicate that the bigger picture trend has turned up and the bullish case for new ATH's becomes preferred. As tweeted on Wednesday, the SPX / ES only declined to minimum fib support and turned higher. Bears need...

Last week, US equities continued to extend gains with the ES / SPX finally tagging equality targets. Our base case is for a near term top in equities followed by a resumption of the bigger picture downtrend. The alternate bull case is for a continued impulse rally to new ATH's - we are at a near term inflection point for equities. Crude Oil continued its slide while gold and silver faded from overbought extremes. Bonds appear sticky to the upside while the US dollar remains range bound as the...

Late last week the Fed announced further funding measures to effectively provide a bridging loan to US corporates to help carry them through this severe demand shock triggered by the Coronavirus shut down. The Fed is doing what it can to ensure a basically functioning financial system and provide banks with sufficient balance sheet capacity to lend to the real economy. These are extraordinary times requiring extraordinary measures from global central banks. The challenge is that the Fed cannot...

Last week, global equity indices declined in a corrective 3 waves of equality and formed an "inside week" following the prior week's sharp decline. The 38.2% fib retracement met the minimum conditions for a corrective wave (b)/(ii) decline. The rally from last week's lows is NOT yet clearly impulsive so we need to see upside follow through above last week's highs to help confirm our blue base case. Bulls need to hold Friday's lows. Bonds held marginal gains but the rally appears extended and...

Last week the Fed introduced extreme measures (0.25% interest and unlimited QE) to stabilise the financial system... and stabilise it did. Fortunately we were looking for a tradable low and trend exhaustion as we flattened positions across the board. Perhaps the biggest impact of the Fed intervention was not the equity rally but rather the weakening of the US dollar - this is potentially the Fed's most potent tool for reflating markets given the historic levels of US$ denominated debt. From a...

Last week, the risk-off environment continued as expected with US indices achieving minimum downside targets. This morning the Fed announced another rate cut to 0-0.25% coupled with a minimum $700bn expansion in QE. While we applaud the Fed in providing global liquidity to continue functioning markets, this is not a monetary problem - this is a global health problem that requires global leadership. Given the global economic dislocations now taking place after global growth was already slowing,...

Last week, the US equity markets bounced to retrace 50% of the prior decline before turning lower again despite (and maybe because) of the Fed's emergency rate cut. Global equities continued to decline across the board. Our bearish positioning remains unchanged as we look for wave (iii) / (c) lower. The near term question is whether US equities can hold recent swing lows for a more complex correction higher in wave c of (ii) / (b) (as tweeted)? While the setup is there, it will depend on how...

Last week we got the downside confirmation we were looking for in global risk markets. We have long held that this latest rally was an ending wave C of (B) - a phoney. The market proved out our thesis and fell sharply back through breakout support. Our thesis of extended volatility compression leading to volatility expansion played out as the VIX exploded higher into long term resistance. This last week has validated our positioning and outlook. " Last week saw another failure at marginal new...