Risk-Weighted Index: Violation of 100-ema Heralds Trouble Ahead
The risk-weighted index, mainly driven by a sharp decline in the EM MSCI index, further anchored by a fall in US 30-yr Treasury yields and strength in the Yen and Swiss Franc, is communicating that the outlook for risk appetite looks quite poor this Friday and heading into next week's trading. The hourly chart has broken below its 100-hourly ema, which has been an accurate measure to assess the positive/negative dynamics in the overall risk sentiment. The sudden collapse in risk below the moving average is a red flag that suggests the likes of the Japanese Yen and the Swiss Franc may find further capital inflows. On the broader context, we present a weekly chart, to understand where we are in the risk cycle. The index is retesting the origin of the GFC supply imbalance, struggling to make further gains, and most importantly, an ascending trendline, which has been a precursor of capitulation in risk, has already been breached.
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