Statistically this was our least volatile week registered so far. Only one return moved past +-1 sigma. However, this should not hide the amount of contracted markets that are ready to make explosive moves in the near future.

  • In stocks, the spread between U.S and euro stocks is obvious. The U.S is primed for a sharp move to the downside while most European indexes have recovered enough for us to move to neutral biases.
  • FX was also quiet but a lot of names are ready to get moving. The best setups are Euro and pound strength over the U.S dollar.
  • Gold is setting up for a monster breakout which is shown in detail below. Crude oil has a similar setup but it will likely take longer for it to play out.


Market: S&P500

Reason for observation: Daily bear flag setup

Short-term bias: Bearish

Long-term bias: Bullish

Here is our look on the current market setup. As we have been mentioning, this is the first real shot for the bears in a very long time. Short-term traders do not want to be fading weakness in the near-term. Long-term investors can add to long positions on another sell off.


Market: FTSE

Reason for observation: Sharp reversal

Short-term bias: Neutral

Long-term bias: Bullish

The clear divergence between U.S and euro stocks shown here. While the U.S is moving sideways on lows, European stocks staged a sharp reversal back above the support zone. No directional bias in the short-term for now.


Market: EURUSD

Reason for observation: Weekly bull flag setup

Short-term bias: Bullish

Long-term bias: Bullish

This weekly volatility contraction is the long-term catalyst right now for the Euro. A breakout is likely to have strong continuation and in context, this breakout is more probable to resolve upwards.


Market: 20 yr U.S tsy

Reason for observation: Weekly bear flag setup

Short-term bias: Bearish

Long-term bias: Bearish

Watching this weekly bear flag for the next big move in U.S long term bonds. May take a few more weeks to unfold so patience is required.


Market: Gold

Reason for observation: Weekly breakout potential

Short-term bias: Bullish

Long-term bias: Neutral

This range under the breakout zone is likely bullish but hard to place any trades until the move actually happens. Aggressive traders could be positioning using options as volatility will expand should this breakout occur.


Market: Crude oil

Reason for observation: Weekly bull flag setup

Short-term bias: Bullish

Long-term bias: Bullish

Even with recent downside, bullish setups in crude oil are still apparent. For now, longs and shorts should be patient until the trade actual triggers.