Sunday, 31 August 2014

Market Analysis Aug 31st



Here's a quick tour of all major asset classes. A couple interesting events are taking place - namely in the gold miners and US Dollar.

US EQUITIES

$SPX (Weekly) is making another run for multi-year channel resistance while carrying negative RSI divergence.



BONDS

$TNX (Daily) - 10year Treasury Yield continues to act weak after breaking down from a 1-year topping formation with negative RSI.


$UST (Daily) confirms the picture above. This week, the 10year Treasury Price retested the neckline of a rounded bottom base with bullish RSI divergence.


$HYG (Weekly) - The Corporate High-Yield ETF is retesting a 5-year falling wedge breakdown. 


$JNK:$USB (Daily) - This week, the junk to long treasury bond ratio retested the neckline of a broken top. Notice the bearish RSI divergence of this ratio as well. Just like HYG, this ratio is giving a warning for US equities.



CURRENCIES

Friday was the last trading day of August and the monthly chart for the USD is breaking 10-year resistance. A retest of this breakout line should be expected.


EUR (Weekly) is looking very ugly: In a free-fall with no major support until 128 (-2%). 


YEN (Weekly) also is very weak, with further room to fall. 



GOLD

Seasonally, September is gold's best month of the year. And while the US Dollar has had its best 2-month rally since early 2013, Gold and Gold miners have held up relatively well and did not breach their June lows.

Gold, Silver and Silver:Gold (Weekly) all held price and RSI support this week






The gold miners also made good progress this week. Here's GDX (Weekly close) rallying after retesting dual support


GLDX (Weekly) held support at the 2-year base neckline.  


This week, HUI (Weekly) starting doing what I've been waiting for. The well-defined 2-year base neckline inched towards a breakout. Watch for follow-through this coming week. 


CDNX (Weekly) - The Canadian Venture is highly correlated with gold and coal miners. It's weekly chart has been very clean & impressive: A 3-year falling wedge breakout & retest was followed by a double bottom base breakout & retest. The recent lows a couple weeks ago took us to RSI support and we bounced from there. Watching the purple pennant to resolve to the upside. 




COMMODITIES

Commodities seem to have found support in recent weeks. 

Here are DBA and DBC weekly charts on both price & RSI support: 



Natural Gas (weekly) has been rallying off a 5-year support line. 


JJC (Weekly): Copper slipped 2% this week but is still holding a 3-year wedge breakout


KOL (Weekly): Coal continues to hold support at the 2-year base neckline. 


CCI:SPX (Weekly) ratio gained 1% this week after retesting the 3-year falling wedge breakout in the previous week. 




Saturday, 23 August 2014

Market Analysis Aug 23rd


I've got my Matcha tea - let's take a tour through the major asset classes.

BONDS

TNX (Daily): 10-year treasury bond yield broke down from a major top a couple weeks ago. It continues to act bearish.


UST (Daily): 10-year treasury bond price looks like it will retest its downtrend breakout as new support before moving higher.


HYG (Weekly): The high-yield corporate bond is retesting its 5-year falling wedge breakdown as new resistance. Notice the correlation with the SPX - not a good sign for US equities. 


JNK:USB (Daily) Ratio is testing the neckline of a confirmed top as new resistance. Watch for this to possibly put the brakes on US equities.  



CURRENCIES

The only chart in the currency space I'm watching right now is the US Dollar on a monthly timeframe. The dollar is at 10-year resistance while sentiment is at levels where a pullback has occurred. Perhaps this is the moment the dollar takes a break and lets commodities run. With next week being the final week of Aug, watch where this chart closes on Friday.




GOLD & GOLD MINERS

While US dollar is at 10-year resistance, Gold is sitting on 15-year support.


In addition, Gold and Silver are also retesting 2-year former downtrends as new support. RSI is also on support with bullish divergence from price. 


With Gold and Silver both on price & RSI support, it should come as no surprise that the Silver:Gold ratio is also on price & RSI support: 


Gold miners are also on major support. Below is GDX on a weekly closing basis. It's sitting on dual support 


GDXJ (Weekly) was held by 1-year support this week. It's also being helped by bullish RSI divergence and strong accumulation.


CDNX (Weekly): We've noted several times before that the Canadian Venture Exchange is highly correlated with Gold and Coal miners. This index bounced off RSI support this week. Very encouraging for commodities & miners. 


HUI (Weekly): Again, this is the index that worries me. I need to see a breakout above the indicated blue resistance before taking aggressive long positions in the gold miners. 



BASIC MATERIALS

On to the basic materials.

JJC (Weekly): Copper bounced nicely this week after retesting the 3-year falling wedge breakout. Note the 3% gain in copper this week occurred while the US Dollar gained 1%, making the move even more impressive.


JJU (Weekly): Aluminum continues to consolidate very nicely after breaking out of a 3-year falling wedge. 


JJN (Weekly): Nickel has been the strongest performing basic materials this year, gaining over 60% (trough-peak). Nickel is consolidating nicely here. Watch for an upside breakout.  


DBC (Weekly) is currently sitting on both price & RSI support.


CCI:SPX (Weekly) Ratio is retesting a 3-year falling wedge breakout. Look for commodities to outperform US equities here.



BASIC MAT'L MINERS

Miners of basic materials have been leading their underlying commodities. This is the sector that has been absolutely crushing it in the past year.

AA (Daily): Aluminum producer, Alcoa, has stair-stepped itself to an over 100% gain in less than one year. RSI has never dipped below 50 this whole move - a very bullish sign.



NOR (Weekly): Another aluminum producer, Noranda, made a 100% move in 3 months starting in Dec. It now looks like a giant cup & handle base is nearing completion.  


AKS (Weekly): Steel producer, AK Steel, has almost tripled in the past year after building a nice rounded base for much of 2013. This past week, it broke through significant long-term resistance at $10. 


X (Weekly): Similary, US Steel has more than doubled in the past year.



FM (Weekly): Copper producer, First Quantum, has nearly doubled in the past year and has broke out of a multi-year wedge. For the past 2 months, FM has been forming a bullish falling wedge consolidation. Watch for an upside breakout


TCK (Weekly): Another copper producer, Teck, is retesting a 3-year falling wedge breakout just like its underlying metal.


PKX (Weekly): This Chinese iron & steel producer has broken out of an 8-year downtrend in early July.   


SLX (Weekly): The Steel ETF has been basing for an upside breakout 



CLOSING REMARKS:

While commodities & miners are retesting breakouts or consolidating after nice rallies, USD is facing 10-year resistance with elevated sentiment. I'm looking for some commodities to start their rallies & others to resume, while the dollar takes a pause. Treasury bonds (which are correlated with gold) confirm this outlook.

That's all - enjoy your weekend and the rest of your summer!

Saturday, 16 August 2014

Market Analysis Aug 16th



I'm writing this post from a remote part of northern BC today. What better place to look at where markets ended the week than the quiet wilderness?

BONDS

Recently, I did a post looking at bonds in detail (see Signals from the Bond Market).

Our bullish thesis on treasury bonds saw significant follow through this week. $TNX (10-year Treasury YIELD) fell big after retesting a broken 1-year neckline with bearish divergence


$UST (10-year Treasury PRICE) confirms this as well. UST continues to rally after breaking out of a 1-year base with bullish RSI divergence. Again, this is positive for Gold and the Yen.


$JNK:$USB (Junk Bonds to 30-year Treasury Bond) Ratio has a strong direct correlation with US equities. Notice how it recently broke down from a topping process with bearish RSI divergence similar to in 2011 when the S&P 500 fell almost 20%. This is not the place to be long US equities.



CURRENCIES

EUR (Weekly): After breaking down from 2-year support, the Euro has been wicking the horizontal support for 3 consecutive weeks. A retest of the broken uptrend is likely, especially given how bullish the Smart Money is on the Euro. Longer-term, the Euro may potentially be forming a H&S top.



Meanwhile, the US Dollar has been stalling at resistance for 3 consecutive weeks. We may get a retest of the wedge breakout before resuming higher in the longer-term. 


The Yen is also on support with a very bullish positioning by the Smart Money:




GOLD

Another very volatile week in Gold, however the bullish message on the weekly charts is still intact.

Gold (Weekly) is retesting its 1-year downtrend breakout as new support



Gold Miners (GDX, GDXJ, GLDX) are still retesting their 1-year inverse H&S neckline breakouts as new support. GLDX gives the clearest picture of this.



The HUI:GOLD ratio continues to strengthen nicely after breaking out of a 3-year falling channel


The one hurdle that I'm watching is the $HUI weekly chart. Notice how this week's candle couldn't break above the 1-year inverse H&S neckline. I do believe the HUI will catch up with the other mining indices and breakout. Keep on an eye on this.


COMMODITIES

KOL (Weekly) has been a true champion after breaking out from a 1-year price & RSI base. 


URA (Weekly) posted a nice 3% gain this week, refusing to fall back to the all-time lows. The green line would be the first significant resistance.


Copper (Weekly) retesting the 3-year falling wedge breakout this week. Watch for these levels to hold


DBC (Weekly): This diversified commodities ETF is nearing major price & RSI support. Watch for those levels to hold.


Finally, here's the weekly chart for DBA - the agriculture ETF. DBA is finding support at the 61.8% fib retracement and RSI support. Watch for these levels to hold. 



EMERGING MARKETS

Both the Emerging Markets ETF (EEM) and Shanghai Index (SSEC) are consolidating after breaking out of multi-year wedges. Again, this ties in nicely with the bullish setups I'm seeing in the miners.



That's all for now. Enjoy your weekend!