Macro risk analysis - Daily Form for June 3, 2011

Inter-market Technical Analysis using algorithmic pattern detection

FRIDAY JUNE 3, 2011       11:02:00 GMT

The big picture that has emerged during the last few sessions is that global equities are now coming under considerable pressure as asset managers are preferring to "hide out" in global government bonds (except of course for the EZ periphery) rather than take on more risky assets.

The question is - to paraphrase Art Cashin from UBS (a CNBC regular for those who don’t watch) - whether bad news really is bad news for stocks. We may be a little closer to knowing the answer to that in a few hours when the US Dept of Labor release the NFP report for May.

As can be seen from the 240 minute chart traders have positioned themselves defensively right at the base of the range over the last few weeks. Of course, it could be that there will be a lot of fireworks after the data is released but that, later in the session, the S&P 500 may well drift back to close not far from where it is right now.

One sector chart which should be monitored closely in coming sessions is for the US retail sector (RLX).

The recent action which includes a break below the 50 day EMA as well as a peek below the cloud formation suggests that the 500 level may now be the next target in the intermediate term. A topping out for US consumers - as would be suggested if this index fails to find support soon - would not be a good development for risk appetite...but then again could it be the trigger for more QE?

Sterling has dropped to a new low in recent history against the Swiss Franc as can be seen on the weekly chart. This validates the viewpoint that was expressed in a piece I blogged recently and which was reprinted here.

The focus on the action in GBP/CHF - as indicated in previous discussions regarding EUR/CHF - illustrates why it is better to play most other currencies against the Swiss currency rather than the dollar as the trends are far more evident in cross rates against the franc.

The Hang Seng index dropped 1.3% in Asian trading Friday, and came to rest for the week at exactly the 200 day EMA.

Interestingly the Shanghai index diverged against the Hong Kong market and continued its bounce off the 2700 level.