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UBS Fears False Dawn In Stocks: “We Don’t Have The Sentiment For A New Breakout”

While asset-gatheres and commission-takers are celebrating the record highs in stocks – after the world did not end last weekend – UBS Technical Analyst team is a little less sanguine, fearing that this move to new record highs in the S&P could well be another false breakout due to a lack of sentiment signals in derivatives-land, and breadth breaking down.

On the one hand, the SPX is making marginal new all-time highs but on the other hand, we have the very steep 2016 bull trend underpinning the market coming under pressure to further deliver – if not break this trend.

Taking into account the very low CBOE put/call ratio…


And, in the historical context, still quite high SKEW/VIX ratio…


We still see a high likelihood for a second corrective pullback into early October; in this case we would see the SPX breaking its 2016 bull trend, which at least short-term would produce some kind of market volatility.

Additionally UBS notes that VIX is still around its 24-year low, which should cap the market on the upside. More importantly, with a marginal new SPX high we would very likely see the VIX index not marking a new low, which would be per definition a divergence, which tactically would be toppish instead of expecting a new broad-based breakout campaign.


UBS also notes that bank stocks have begun to catch back down to the yield curve's reality…


And on a global basis, notable bearish divergences are everywhere…

Momentum is rolling over across numerous markets…


And as Global Stocks Index hits record highs, so new 52-week highs for each country are fading…


So when does this end?

Soon, very soon.


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