Today's interesting charts
Eoin Treacy's view US yield curve spread (10yr - 2yr) - The spread appears to have peaked below 300 basis points for the third time in 20 years reflecting just how loose monetary policy is at present. While policy has not yet begun to tighten significantly, this spread looks unlikely to widen very much farther.
Brent Crude Oil - in 2008 oil spent 195 days above $100 and so far in 2011 184 days. High energy prices act as a tax on consumption and have been a leading cause of recessions over the last 50 years. Prices encountered resistance in the region of $120 again on Monday and will need to sustain a move above that level to question potential for some additional weakness.
US Treasuries - surged higher over the last few days, extending the six-month uptrend. While getting overextended in the short-term a clear downward dynamic sustained for more than a day or two would be required to question current upside momentum.
Gold - remains in a consistent albeit steepening 10-year uptrend. While becoming increasingly overextended relative to the 200-day MA, a sustained move below $1450 would be required to begin to question medium-term upside potential.
EuroStoxx Banks - continues to extend the medium-term downtrend. While the pace of the decline has increased and the Index is becoming more over extended relative to the 200-day MA, a sustained move above 160 would be required, at a minimum, to question the consistency of the decline.
Nasdaq-100 - failed to sustain the break above 2400 three weeks ago and pulled back into the range in a dynamic fashion. This increases the likelihood of a retest of the 2200 level and a countermanding upward dynamic would be required to question this view.
FTSE-100 - has fallen below the June low near 5650 and will need to find support in this area to avoid medium-term top formation completion. (Also see Comment of the Day on July 29th).
Australia ASX 200 - extends the three-month downtrend and approaching last year's reaction lows near 4185. A break of the short-term progression of lower highs is required to check the current supply dominated environment.
Singapore - in the process of forming a weekly key reversal following an unsuccessful attempt to break out of the six-month range. A countermanding upward dynamic is now required to offset current scope for some additional weakness.
Switzerland - has become overextended relative to the 200-day MA and found at least short-term support today following the central bank's attempt to weaken the Swiss Franc. However, despite some scope for a short covering rally, technical damage has been done and a sustained move above 6000 at a minimum will be required to indicate a return to demand dominance beyond the very short term.
Brazil - appears to be in the process of completing a Type-3 top (ranging, time and size as taught at The Chart Seminar). A sustained move above 64,000 remains needed to check current scope for additional downside.
South Korea - pulls back sharply to test the 200-day MA. The medium-term progression of higher major reaction lows, currently in the region of 2000, remains intact but will need to hold, if the 30-month uptrend is to remain consistent.
Indonesia - is somewhat overextended relative to the 200-day MA following six consecutive weeks to the upside. The potential for at least a pullback and consolidation has increased with the deterioration evident on global stock market indices.
In conclusion, the recent end of QE2, high oil prices, deteriorating Eurozone credit conditions, Japan's economic slowdown, concerns about China's non-performing loans as well as other factors have contributed to a general loss of confidence among investors. A large number of stock market indices have experienced technical deterioration this week. While this is not irreparable, it is for the bulls to prove their case and we have yet to see convincing signs that demand is returning to dominance.
Perceived safe havens such as gold, AAA rated sovereign bonds and strong currencies have surged in value. Some of the better performing stock markets, particularly in Asia, have yet to show signs that the current malaise in the USA and Europe is affecting them. However this is unlikely to last if Wall Street continues to weaken.
Asia remains the world's growth engine. It is reasonable to expect that in the event of a deeper correction it will be Asia and most probably the ASEAN region that will lead to the upside.