Bonds: Treasuries Finally Break
Stocks: Keep it Simple
Commodities: Crude and Copper Strengthen
Currencies: Aussie Continues to Flex
Bonds
10yr T-Note
The 10yr T-Note finally broke down out of a 10-month H&S Top. The breakout was preceded by the completion of an 8-week Descending Triangle, acting as a launching pattern for the larger H&S Top. The initial target, as a measurement of the height of the Top, comes into play around 134^020.
30yr T-Bond
The 30yr T-Bond also broke down from a topping pattern. The initial measured move and target sit around 157^18.
Junk vs. Investment Grade Bonds
The breakdown in US Treasuries is extremely bullish for stocks. I covered this in a recent post you can check out here, but that's not the only development in the bond market that reinforces strength in stocks.
Another development I have been monitoring in the bond market is the relative performance of riskier High Yield Corporate Bonds (HYG) versus their safer alternative, Investment Grade Bonds (LQD). We are starting to see the HYG/LQD ratio chart resolve to the upside, indicating that the riskier asset is outperforming its safer alternative and that investors are more willing to take on risk. The chart below shows that in the past, this behavior supported higher prices in equities.
Stocks
Dow Jones Industrial Average
The Dow Jones Industrial Average is possibly the most important index in the world. All eyes are on the Dow, and it's printing new all-time highs.
Dow Jones Transportation Average
Dow Theory 101: Transports confirming Industrials. New all-time weekly closing highs for Transports, confirming the same price behavior in Industrials.
Wilshire 5000 - DWC
I like the Wilshire 5000. It looks very similar to the S&P 1500, but has more than twice as many components. Notice how the 2016 highs supported price during the March sell-off. Again, new all-time closing highs on the weekly chart.
The Value Line Geometric Index - VLG
This is another one of my favorite indexes. The VLG tracks the median North American stock. I love the fact we can visualize the middle-of-the-road, and that it peaked in 2018 with the rest of the world's risk assets. This past week it broke above those 2018 highs and registered a new all-time weekly closing high.
S&P 400 Mid-Caps
Mids are making sure to join in the fun. Keep your eyes on the horizon and catch your wave.
Russell 2000 ETF - IWM
Small-cap strength is another area of the market that speaks to an increase in risk appetite and demand for equities.
The Global Dow - GDOW
The Global Dow is one of my favorite indexes, and if you have read any of my past posts you know I use it a lot. It's composition is both broad and diverse, and only includes 150 companies from both developed and emerging markets. The GDOW had a strong week, closing out at new all-time highs.
FTSE 100 Index
The FTSE might not have hit new all-time highs, but it had a great week. The fact that price blew through former support turned resistance, and is back above those 2016 and 2018 lows is very constructive for equities everywhere.
Commodities
CRB Commodity Continuous Index - TRCCI
Lots of indecision in the weekly candle of the equally-weighted TRCCI. I will keep a close eye on this index as well as the areas of the market that seemed a little vulnerable last week, like grains and precious metals.
WTI Crude Oil
It is very likely that Crude Oil is on its way to those 2019 highs.
Copper
Copper had a strong week along with other industrial metals and materials. The trend is most definitely up for Copper, and it's just getting started.
Industrial Metals
Below is a chart of a few industrial metals over the past two years. I wanted to display this chart because rates finally broke out last week, and to posit industrial metals next to precious metals. They look very different from the next two charts.
Gold
Copper broke out in August, and since then precious metals have been consolidating. The chart of Gold presents a possible H&S continuation pattern that is in the process of developing a right shoulder. When momentum bounced off of oversold readings in March, it consolidated along with price before moving higher. Could we see a similar pattern unfold over the next couple months?
Either way it appears money prefers other areas of the market.
Silver
I think we found a significant area of resistance on the daily chart of Silver last week. I will monitor the 27.80 - 28.00 level for a breakout in the future.
Sugar #11
NY Sugar closed above the resistance level of a 3.5yr base; however, the manner in which it did was pretty weak. The weekly candle looks like a gravestone doji or shooting star. Both carry bearish implications.
Sugar #5
The London contract for Sugar #5 had a much better close above the breakout level last week. If I had to choose, I would be long London Sugar.
OJ
Orange Juice continues to put in a possible right should of a H&S Bottom. A solid close above 129.00 would confirm the breakout.
Currencies
Dollar Index - DXY
The descent of the USD slowed last week, providing an opportunity to find areas of the currency market that were not affected.
WisdomTree Emerging Currency Fund - CEW
CEW chops sideways below an area of overhead supply, while in a bullish momentum regime. I will keep an eye on the developing consolidation for any signs of weakness.
USD Overview
While the DXY halted its decline last week, it's important to note how different currencies were affected. The big takeaway is how little the Aussie $ seemed to care.
Aussie$ Index
Regardless of the day to day movements in the USD, the AUD continues to show broad strength. This makes sense as the "reflation trade" unfolds.
Aussie$ vs. BRICS Currencies
AUD broke out of a bullish flag against an index of BRICS currencies. This continues to showcase AUD strength, as well as the type of forceful move expected after the completion of a flag or pennant.
EUR/AUD
The Euro continued to breakdown against the Aussie last week. Support could come in around 1.5350 and the December 2018 lows.
GBP/AUD
The Pound also continues to breakdown against the Aussie. I like how this chart depicts the nature of price action. Periods of expansion and consolidation unfolding one after another, often following the primary trend.
USD/NOK
The Norwegian Krone, another currency tightly bound to commodities and risk appetite, wasn't bothered by USD fluctuations last week.
EUR/NOK
Similar to the Aussie, the NOK is beginning to show strength across the market. The EUR joined the USD in breaking down against the NOK last week.
A few markets developing trade set-ups:
NZD/USD
I really like the NZD$. It led many currencies with its breakout from the H&S Bottom, it never looked back after the breakout, and it's about half-way to its measured target. Hopefully, a short term consolidation pattern develops.
AUD/NZD
I'm continuing to keep my eye on the AUD/NZD cross, and the massive Symmetrical Triangle that is developing.
EUR/GBP
I think the EUR/GBP could be headed to parity. The more frequent and recent tests of the upper boundary fuel those thoughts.
Crypto
Bitcoin
Bitcoin continues to charge towards the next expansion level. Support should come in between 30,000 - 31,700.
Ethereum
Ethereum eyes former all-time highs.
Litecoin
Litecoin confirmed the completion a of 3yr Symmetrical Triangle with a weekly close above 142. The initial target for this pattern measures around 925.
RIOT
RIOT tapped the 685.4% Fib level, and then retreated by the close on Friday. Support lies around 17.85 and the 423.6% Fib expansion level.
That's it for this week's report. I hope everyone has a great week!
Thanks for reading! If you have any questions or comments, please feel free to contact me at ianculley@culleycharts.com
DISCLAIMER: All information and opinions expressed by Culley Charts are strictly that, and should not be construed as investment advice. Market participation comes with inherent risk, and the responsibility of managing this risk lies solely with each individual investor.
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