Once more I have the same problem – where to start when so many charts are begging for attention.
It is generally believed that we will have an interest rate cut in the US in coming days. So….let’s have another look at my ten-year bond chart for the US. The problem we have here is that this chart got as high as 5% a year ago and is now sitting 3.66%. I am a bit concerned that a rate cut has already been discounted and when it finally comes it might act as a disappointment. We are going to have to follow this closely.
Last week I suggested that the most important chart was the US dollar. Typical of markets it did absolutely nothing this week and just continued sideways. There is pretty reasonable support down here below 101 but at the same time the overhead resistance is fairly massive as well. Once more we are going to have to watch what happens here.
And for a different look at the US dollar today I have the yuan against the US dollar. It virtually never changed since the beginning of the year going sideways but in August, someone made some sort of decision and suddenly it started to firm against the dollar. It is now in a rather neat little triangle. If this breaks topside, it increases dramatically the risk of the US dollar falling quite sharply. Again, something we are going to really be conscious of.
And of course, all these currency movements have had a somewhat dramatic effect on gold. Looking at the daily chart here we see it had so many little tops in the 2550/2555 range and then suddenly it took out all these tops. You can well imagine that there would have been many stops sitting there. Gold just loves to trigger stops. So, can it pull back to what is now support before moving on. The currencies and the gold market are so closely intertwined that we have to watch every moment.
And now GLD (the yellow stuff) and GDX (stocks) together with the ratio of these two at the bottom of the chart. It was good to see a bit better performance of the stocks, taking the ratio backup above that very important blue line. We really need more money to go into the stocks to match what is happening in the metal itself (Central Banks?).
Next, I have the price of copper in red and below COPX (stocks). Here again, despite a bit of an improvement in the price of copper, COPX has not even broken its downtrend. We really do need to see some of the money that is washing around markets, start moving across to these mining stocks, or this slight improvement in metals will quickly fade.
Here again we see the same sort of thing – this time uranium and covering stocks, the ETF URA. Once more the uranium price has had a slight improvement and despite the bit of excitement in stocks over the week, they have not been able to break out of the downtrend.
Moving over to Wall Street with the S&P, in the middle is the A/D (new high) and at the bottom the VIX – important to note that the scale of VIX is inverted. I cut off the extent of that crazy move in the VIX last month when it actually went to 63!
So, we now have the S&P up against the highs we have set over the last three months. Five up days already. Can it burst through? And if it does, can it hold it. Over the last few weeks, the VIX has not been keeping up with the Index as it normally does – note the downtrend I have there (remembering these are lows – not highs). I actually think the VIX might be the thing to watch over the next few days.
And looking a bit more closely at the tech side of their market, I have included QQQ and QQEW (equal weight). Note here that both of these charts are still in their downtrend but have considerable resistance above even if they can break these downtrends.
For a slightly different look at things – the next chart is IGV – software ETF. Again, right up under the tops – also note that it was at this level in February so hasn’t advanced very far over this period. Another one to watch this week.
Then coming back home – starting with XBK – the banks. In Friday’s excitement in our market, banks were a noticeable weak spot. As we can see from this chart, they have had a pretty good year but surely must be starting to get a bit tired. Need to watch this section.
The next chart is a little bit interesting – my favourite little XSR – so called small resources. I have two lines on this chart- the higher one is the index – remember we only get closing prices on this – and on the lower level my overbought oversold indicator for this sector. Note how there have now been two occasions when the index went lower, but the indictor did not and in each case, has led to an improvement in the XSR. At Friday’s close, we had just nudged the downtrend. Having looked at the commodities earlier in these notes, I really want to see some sustained buying across the sector rather than just these rallies.
Once more moving around the globe – I can’t help drawing attention to the weekly chart of Shanghai. I don't think most people appreciate just what a poor performance this market has had since 2016 as it has virtually just gone sideways in a wide band. I mentioned last week that they needed to pull some sort of rabbit out of a hat to halt this decline but so far, they have not been successful. What we must be careful of here is that there is such negative sentiment around this market – and why wouldn’t there be - but that is usually when turns can come. Once more, something we need to be very aware of.
(20min delay)