KRUGER INSIGHTS WEDNESDAY, NOVEMBER 20, 2013

Joel Kruger 

Will Take What We Can Get - So not exactly the follow through I was looking for in US equity markets after a convincing bearish reversal day from record highs on Monday. Still, I suppose the fact that we didn't negate the pattern and actually managed to at least closer lower in the S&P, was a small victory for my bearish outlook. Interestingly enough, when looking at the bullish S&P channel since November 2012, it actually seems as though the market should really stall out here, and at a minimum, start to roll back over towards the 1700 area, where the next medium-term higher low is sought out ( I contend that we will fail to make that next higher low, with the market actually turning quite bearish as 1700 is easily breached). I will now be looking for a more intensified liquidation in stocks over the coming sessions, and I wouldn't be surprised in any way if the catalyst for such action was the pricing out of some ultra dovishness that had been discounted post Yellen testimony. Technically, the S&P will need to take out initial stops below 1750 to get things going, but a break of this level might not be as far off as many of you think. 

Still Worth A Few Bucks - As far as currency markets are concerned, not much to report except for a whole lot of yawning. We really haven't seen any excitement in recent months, with the latest USD/JPY break back over 100.00 probably topping the list of head turners. While the Euro has been very well bid over the past several sessions, I wouldn't get too excited about this market breaking out unless we can establish back over 1.3550. I would say that a daily close above the level would be required to shift the short-term structure, and even then, on a medium-term basis, I still favor selling rallies. If we do in fact get that pickup in equity selling in the sessions ahead, I would also be careful with any broader short USD exposure. Downside pressure in stocks could translate into a flight to safety -flight to buck mentality, and the US Dollar could emerge as a clear outperformer. Let us also not forget that if equity markets come under pressure on Fed reversal expectations, this would fuel positive US Dollar flows on yield differentials. Finally, it is worth mentioning that some risk correlated currencies have been showing renewed sell interest of late. If we look at markets like the Peso, Rand, it helps to confirm suspicions of a potential escalation in uncertainty.