Prepare For A Failed Breakout

Failed breakout

Thursday was an odd session on the markets.

Tech weaker, S&P a touch weaker, bonds much weaker, gold stronger, transports stronger.

Within the Nasdaq, semis were stronger while cloud stocks were much weaker.

Many of the stocks that lead during Covid are softening, or failing to hold on to their breakouts (eg NFLX, AMZN, DPZ, TDOC, CTXS, WORK).

Nadsaq is showing signs of distribution. Squeezed out a new all-time high Thursday, only to close below Wednesday’s low on higher volume.

AUDUSD and AUDJPY have been on fire. They’re right at important resistance now. A failure here would be risk-off, a breakout could see risk-on go nuts.

Here’s what I expect:

– a false breakout in Nasdaq followed by a reversal down

– ditto AUDJPY and AUDUSD (they’ll probably lead)

The put/call ratio is extremely low. This is indicative of a great complacency, and a market where “everyone is long”.

The VIX is at support, haivng tagged it’s lower Bollinger Band and 200 day moving average. If the VIX doesn’t have any further to fall, markets probably don’t have much further to rise.

The employment report is out today. Consensus is for 19.8% unemployment. Goldman is expecting an unemployment rate of 21.5% as workers classified as “employed but not at work” in April will be reclassified as unemployed in May.

But 20% unemployment and Nasdaq is at all-time highs…who would have thought?!

For many years I’ve strongly resisted the notion that “markets are rigged”, but COME ON!!

Futures are strong because why the heck not? It’s magical risk-free Friday after all 😉

Good trading everyone!

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