Stock markets are now in no-man’s-land, with no clear neat-term direction.  In fact, I anticipated this phase since the May 6 low in the Dow/S&P.  That is why I have advised caution in taking new positions until the fog clears.

While global economies continue along their path towards a deflationary depression with the latest data points continuing the months-long weak theme.  Stocks continue their levitation in the hope that things will somehow turn around in this quarter and magically, the Fed will delay yet again raising interest rates and keep stocks aloft.

In fact, the march into negative yields by a growing cohort of sovereign bonds continues. Amazingly In Denmark, banks are offering negative mortgages where the banks pay the home owner a monthly repayment to take out one of their mortgages! Of course, the principal must be repaid monthly, so the banks are not that desperate to put money into the hands of consumers (but almost). I’m sure that will end well.

And despite all of these crazy manipulations to get consumers to spend and raise the inflation rate from the current negative-to-zero range – and the tsunami of QE money printing over the past eight years – the inflation needle still points down and the savings rate still climbs.  And GDP growth remains on the floor and heads down.

Consumers are maxed out on their credit cards with Peak Debt having been reached.  But not sovereigns!  Here is today’s piece by AEP on Italy’s perilous situation with growth heading over the precipice chained as it is to the euro.

What an utter indictment of the utter failure of central banks to influence the economy (unless in a negative way, of course).  This realisation is slowly creeping over the markets.

And today, Carney tries to frighten the horses yet again by claiming reduced UK growth prospects if we leave the EU.  The elite sure are sounding desperate – and they are clearly running scared for their jobs.  When reality catches up, central bankers will be heading for oblivion, as I have long forecast.

It is the stock markets that are acting as the referee in this titanic struggle between inflation (bullish) and deflation (bearish).

The China 30 Index

One of the more vivid demonstrations of the battle is the China stock market where rampant mis-representation of official stats is well known – and with the locals’ propensity to gamble, the stock market is the ultimate in manic-depressive expression of social moodsocial mood.

But what caught my eye was the recent chart of the China 30 (IG carries this).  For perspective, here is the one-year daily chart:

Last summer’s swoon was in a clear five impulsive waves and the recovery to January in a three up.  That is textbook, and confirms the main trend remains down.

Since the February lows, the market has staged another recovery as the chatter was for a recovering economy (based on the traditional money printing, of course) and that rally carried to a textbook Fibonacci 50% retrace of the previous wave (yellow bar).  When it hit that resistance, it started to back off and a short trade there would now be in profit.

Here is a closeup of recent action:

I now have a superb tramline pair!  Each has its own PPP (Prior Pivot Point) and the upper line has three accurate touch points, making it a highly reliable line of resistance.

The l ower line has even more accurate touch points and has swung from support to resistance which is its current start following the tramline break earlier this month.

Now the market is in a small rally phase and trying to get back up to kiss the lower tramline.

This is a classic setup for a trade.  I shall be waiting.

Russell 2000 in a pretty wedge

Another very interesting setup is in the Russell 2000

The blue line is a long term trendline that the market bounced down from recently, but just admire the lovely wedge where the upper line has multiple touch points and the lower line although not perfect, has a kiss (red arrow) and scalded cat bounce down to verify it.

All in all, a lovely setup.

I have the feeling that the relative calm on low trading volumes is about to be disturbed.

Apple has lost its shine

I have been following the darling of the tech sector for some time and with the shares off 30% from its highs, is clearly in big trouble

It is breaking down from the Fib 50% support and heading for the 62% level around 84.

How can that be?  It has oodles of cash and has been buying its shares and is only one new product away from taking over the world again.

But positive sentiment reached fever-pitch last year when the company could do no wrong.  But this year, the smartwatch seems to be a failure and that has rattled investors, including Carl Icahn who has dumped his holdings.

The outlook is for lower and lower, punctuated by sharp but brief rallies.