Weekly Macro Analysis 29.06.24
Small Caps time to shine?
On the surface everything looks quite bullish, yet the breadth in the market was abysmal over many weeks…
However this could also mean, that the correction is already behind us, and was masked by Big Tech, and now we could see Small Caps and other Risk On sectors catch up, this is what I see when I look at breadth:
McCLellan Oscillator and Summation Index are turning up, as well as everything else, since friday.
At the same time we had the Russel 2000 outperform the other major indices last week:
DXY has found a major resistance level:
At the same time the speculators are max long the USD, expecting the FED to be much more hawkish than other central banks:
If the FED cuts in july and the economy doesn`t fall off a cliff, we might have a big rally in Small Caps ahead, and many speculators will have to reposition from Big Tech to Small Caps.
Even a small change in the capital allocation could make for an immense move there, as the Mega Cap Tech have become so large.
Another interesting chart is the Nikkei, which also had Speculators go short in expectation of a stronger Yen…
Nikkei broke out of a pennant formation and in my opinion, the Yen is headed for 200:1 against the USD:
The BoJ Interventions don´t do much more than buy some time and squeeze out the speculators with the weak hands.
To be honest, right now is obviousl a bad time to short Yen, and it might bounce here, maybe another intervention by the BoJ on july 4th? Taking advantage of the holiday to squeeze the Yen higher?
I am watching for that, and might even enter a short counter trend trade to hedge my Nikkei exposure.