A small check-up

It's how I would call the sell-off in risk assets that has followed Dubai's announcement. As a result of this check-up, - everything is in place and working: firstly sell emerging countries debt, stocks and currencies, simultaneously buy dollar and contracts on US government bonds. Fine, mission accomplished!
By its self, even the Dubai's default is far from being able to put in danger the world's financial system as it was the case with Lehman Brothers. What is more important it's the reminder to an average investor: "Ok, here in US, Europe, Japan, things are ugly and you can't earn anything on your money, but  be careful when you go outside! Even if it looks great (as Dubai did) it can hurt badly and you'll loose about everything."

Now let's look at currencies. Bellow are two of them : the  Euro, something like a big cap (of DOW Industrial index) and a "high beta small cap" - Australian dollar. And in this space the flight to quality is obvious.

As we can see for EUR/USD, the sell-off wasn't able to push bellow the red trend line. It's certainly a sign of strength and resilience for the single currency. Until this trend line resists we're still able to push higher, toward the upper trend line (1.537) . And seeing what is happening with gold, I consider it as a high probability event.

As for the Aussie, I'm happy that my call was confirmed. We have pierced and later busted the supportive red trend line as well as 55 days exponential moving average. That's serious. While AUD/USD have to go under 0.89 to confirm it's down trend, I think, before, it may take some time to consolidate in the 0.89-0.94 range.

The wind of change

So, the expected correction has finally started and, as for me, did the most of its job last week. In my opinion the trend change is  now  confirmed for semis, small caps, home builders and transports. For Nasdaq my scenario seems to be followed with an exception of starting point. The only broad group where the top is clearly not in are big caps with DOW Industrial and XMI as benchmark indexes.
For inflation related stuff  things are a bit trickier. On one side the GSR (Gold to Silver Ratio) indicates the bottom is in.

On another, gold price and USD index charts still looks uncompleted. The same story for emerging markets ETFs. They had such a strong momentum before the correction has begun, that I can't see them not to make new highs before we'll actually roll over.

Inflation's run

 No surprise, inflation related staff is the best place to be at the moment. Just look at the chart of Brazilian ETF:

And the Russian one:

And, in contrast, the Chinese ETF clearly  shows some signs of fatigue.

May we say : what is good for Russians is bad for Chinese?

As for the US stocks, the trend is about the same: energy stocks are clear outperformers of the broad market, especially if compared to transports and home builders. For last 2 ones I wouldn't be surprised if the tops are already in. In  fact, the decline of DOW Transportation and Homebuilders indexes has unfolded in 5 waves from the top, meaning from the Elliott's wave perspective the trend has changed:

No Top is in, yet

So, it seems, it's a bit frustrating to be a bear theese days.
Yelnick and a lot of other elliottists have reiterated recently "last chance to exit" calls, but no chance, we haven't entered the first wave down, yet, - it's only a zig zag correction. Indeed, it would be surprising to start a new leg down a priori without any notable non confirmation signs. Hopefully, during this new leg up, we will be satisfied.
I'm looking, at least, for a relative underperformance of technological and homebuilders stocks comparing to traditional big caps. On the other hand this wave should mark the highest point of price and optimism for inflation related stuff, like EM stocks/bonds and for precious metals sector as well: "Hey guys, we're facing a hyper(re)inflation, no?"