We have that nagging gut feeling again. Ok, the data continues its trend of "better than expected" surprises with the Euro PMIs but there are factors appearing that leave our post of yesterday of a generalist "it drifts higher" ramble in need of a tweak. Our concerns aren't linked to news flow or the usual developments in Greece, Iran or whatever bad twist the blogosphere has dug up about imminent disaster (we see Barclays has started looking at Skyscraper building as the next portent of doom, especially for China), but the butterflies we feel in the stomach are as follows:
1) The last few days have seen a rush of more spivvy "get me in" euphoria. Nice start to our bigger-bullish view, but nothing goes in a straight line and this phase may be over.
2) The technicals. Soothsayer signals (see glossary) abound with turn signals in the Dow, EuroStoxx and various European index components (DAX, MIB, CAC) and noticeably in a raft of AUD crosses with their normal equity correlations. The shape of most risk asset climbs have been getting thinner in sharp wedge like manners. Dojis spotted?
3) Recent highs in many equity indices means stops have been driven. Leading back to point 1).
4) It's Tuesday. We like Tuesdays for turns. As the run has been up then the turn should be down.
5) Momentum change leads to model driven accounts changing direction and we still think that January has seen the models dominate market moves more than usual as "real" players have mostly sat on their hands and core beliefs unless been forced otherwise. Spivs excepted.
Now the above are hardly Macro and it's not easy when the Heart says buy yet the Gut says sell, but the above are worrying enough to make us want to get out of shorter term longs and take a breather. So despite us remaining general bulls we are going to tune positions and prepare for a shorter term down swing to allow us to re-accumulate longs before (we hope) resuming the grind higher.