Bonds - US Treasuries continue to top
Stocks - US Equities stutter and Asia flexes
Commodities - Grains push against resistance
Currencies - USD teases support
Bonds
I don't want to buy or sell US treasuries at the moment. I still believe that interest rates will rise, and bond prices will fall, but the present moment requires patience.
US 10yr. Treasury Yield
Below is a chart of the US 10yr. yield dating back to 1985. I want to point out the occurrence of extreme oversold events measured by a reading of <20 on the weekly 14-period RSI. Three of the four events, highlighted by clusters of green arrows, were followed by bullish momentum divergences and higher rates. Basically, a reversion to the mean signal within a 35-year, downward trend channel. Interestingly, positive returns do not begin to show until roughly 14-16 months after the extreme RSI reading. This is roughly where we find ourselves today in relation to the last signal on 9/6/2019.
I understand that the number of events might not be statistically relevant, but these are extreme events and there could be some valuable information to glean from the study.
I am currently learning to script in Optuma in order to better present this information. My goal is to have a more conclusive presentation in coming weeks.
US 30yr. Treasury Yield
A recent false breakout in the 30yr. yield signaled a need for continued caution and patience.
10yr. T-Note
I believe the 10yr. T-Note is forming a topping pattern. The development of an abbreviated right shoulder of a possible H&S Top would fall right into my wheelhouse.
30yr. T-Bond
The 30yr. T-Bond remains bound within a well defined range. I expect maturities further out on the yield curve to lead the way. A break below recent lows could get the party started.
Stocks
Though the stock market indexes in the US wavered last week, the global picture is quite promising.
Global Dow
The GDOW is a diverse index of the 150 best stocks from around the world. It broke to new ATHs during the week, but could not manage to hold those highs into the weekend. Regardless of the week's close, this remains extremely bullish for stocks worldwide.
ACWI - All Country World Index
Again the ACWI finishes the week with new ATHs on a closing basis. Albeit not the most convincing, with an inside bar, but all time closing highs nonetheless.
VLA Value Line Arithmetic Index
The Value Line Arithmetic Index is an equally weighted average of North American stocks. The VLA is a way to gauge broad market participation almost like a breadth measure. That value is hitting new ATHs and is extremely constructive for further upside in US stock markets.
NYSE Advance-Decline Line
The NYSE A/D line is a classic breadth measure, and its current implications are very bullish.
US Indexes:
Dow Jones Industrial Average
The DJIA is one of the most important stock market averages in the world in terms of public perception. Professionals may use the S&P 500 as a benchmark, but the broader public listens to Papa Dow. And he's hanging around ATHs.
Last week Dow futures continued to struggle with the 29,500 level, closing out the week at 29,212. Is it a simple out of line movement or a false breakout? I think we can expect continued consolidation around the 29,500 zone, but not a major pullback or correction.
S&P 500
Last week's price action created an arguable bearish engulfing candle. This doesn't mean the market is going to sell-off next week, but it could suggest the need to pause at recent highs and consolidate above 3,392.00. Also, I'm not crazy about the bearish divergence in momentum. However, I believe the recent performance by small and mid caps (S&P 400 made new ATH's last week too) will help support the overall market.
The 3,541.00 level, signifying the breakout level of the symmetrical triangle, could provide support on the daily chart.
Russell 2000
New all time closing highs on a weekly basis for IWM. Small caps are signally that the bull case is well and intact.
Russell 2000 futures may be forming a small pennant or flag on the daily chart.
Nasdaq
Nasdaq futures continue to grind sideways. If small caps are making new ATHs, I have to think this consolidation resolves to the upside.
Asian Indexes showing their muscles:
Nifty 50
Another week and another ATH on the weekly close for the Nifty 50.
Y9999 Taiwan Stock Index
The Y9999 looking strong, pushing a new personal record/ATHs.
Nikkei 225 Index
The Nikkei continues to march higher.
Commodities
WTI Crude Oil
A failure top presents itself as a possibility in Crude Oil futures. It's arguable that price has broken out to the upside of a 10+-week rectangle, and could launch oil into another leg higher.
Dr. Copper
Some might question the intermarket significance of Copper, especially for emerging markets, but I believe the DR. is still in the house. Last week Copper finished strong, pushing towards the significant 3.30 level. Could we see a logical consolidation below overhead supply, or will Copper rip through resistance, adding fuel to equity markets around the globe.
Gold
This past Summer Gold reached new ATHs, stopping at resistance near the 261.8% Fibonacci expansion level. Now the markets needs to catch it's breath after the amazing run since the summer of 2018. There is nothing bearish about current price action. The question is how deep will the correction take price. A consolidation between 2,050 and 1,750 seem reasonable. If the 1,750 support level breaks, then 1,575 could be in the cards.
I'm keeping a close eye on the 1,850 level on the daily chart. If that support level breaks, the 1,750 area is the next stop. That 1,850 level has seemed a bit sticky over the last couple weeks.
Silver
The recent consolidation in Silver has a similar shape to Gold. Support in Silver lies around 22.50.
MOO
I thought this might be fun before getting into the grain markets. The agribusiness ETF, MOO, closed out the week at new ATHs. That seems to support the bull case in grains.
Chicago Wheat
Chicago Wheat continues to hover above the 38.2% Fib retracement level on the weekly chart. It appears this area of former resistance is now stepping in as support.
Other chartists have pointed out a possible H&S Top on the daily chart. A break and close above 616^0 on the continuation chart would signal a H&S failure and flash a buy signal.
KC Wheat
KC Wheat continues to form a rounding bottom pattern as it approaches a significant area of resistance at the 600^0 level.
I prefer to trade KC Wheat over the Chicago varietal. The daily chart is forming a pennant with bullish implications. A break above 572^0 would signal a buy for me.
Soybeans
Soybeans are coming up against some serious resistance and price memory at the 1175^0 - 1185^0 zone. It would make sense for price action to pause and consolidate at current levels. If it doesn't and continues to break higher, things could get very interesting.
Keeping an eye on the 1185^0 level and any sign of a short continuation pattern in the form of a pennant or flag.
Soybean Oil
I mentioned before in an earlier post that Soybean Oil was one of my first trades back in 2016. The breakout failed back then, highlighted in red, but it appears to be working now. I had no idea I would have to wait 4 years to get another swing at Bean Oil around these levels.
I love the sound of a bat hitting a baseball. Imagine the visual expression of that sound on a price chart. This is it.
Soybean Meal
Meal continues its march towards the 261.8% Fib expansion level.
Corn (Weekly)
Corn continues to make a run at the upper boundary of 6+-year trading range. In this weeks Corn chart I want to highlight the Anchored VWAP in red. It's a great example of former resistance becomes support in the form of a moving average. I don't like using moving averages, but I use AVWAPs.
OJ
I've never traded OJ before, and I'm not familiar with the contract. However the chart is telling me to familiarize myself with the contract specs ASAP.
NY Sugar
NY Sugar pushed above resistance, but could not hold by the end of the week. Last week's high is my new breakout level.
London Sugar
I've also included London Sugar to show the similarities and differences between the two Sugar markets. Both markets are forming bases and presenting trading opportunities. However, I much rather trade the market that has tested overhead supply on more occasions.
Currencies
Dollar Index
The DXY is laying down plenty of contact points on the support level at 92.00. The more contact points on a boundary, the weaker it becomes.
Euro FX Futures
I want to get long the Euro. Unfortunately, the volatility between 1.19xxx and 1.20xxx will most likely keep me out.
USD/JPY
The Yen is a great example of the woes of trading against the USD recently.
USD/CHF
The Swissie might be my favorite option to short the USD, besides the NZD$, at the moment. Long term downtrend since Summer 2002, hasn't hit overbought conditions on the weekly chart since 2015, and the daily chart provides a clear entry level.
A close below .9000 on the daily chart would flash a sell signal for me.
Some USD crosses that have found direction:
USD/ISK
The Icelandic Krona is consolidating just below the breakout level. A close below 134.500 in the coming weeks would be constructive.
NZD/USD
The chart below presents a picture perfect H&S Bottom with an abbreviated right shoulder and a clean decisive breakout. The Kiwi's are really doing something right down there.
USD/ZAR
The South African Rand eyeing a former resistance level as a possible target.
Charts I'm keeping an eye on:
CAD$
If the CAD$ can put in a strong close above .77000, then it could retest 2017 highs around .82000 - .83000.
GBP/AUD
The GBP/AUD displays a picture perfect H&S Bottom with an abbreviated right shoulder. Will a clean breakout follow?
GBP/USD
An argument can be made for being long the Pound above 1.3400. That trade is not for me, but I'll keep my eye on it.
AUD/JPY
Here we have another picture perfect H&S Bottom. This cross has huge intermarket implications in regards to risk-on vs. risk-off environments. If we see this cross breaking to the upside out of this bottoming pattern...it's on!
AUD/NZD
The AUD/NZD has been coiling for 5.5+ years as it forms a massive base. I'm not a huge fan of Symmetrical Triangles or Coils, but this patter provides a lot of information. Price has tested the upper boundary of the coil twice as many times as the lower boundary. Demand wants to overcome supply, and I think it's just a matter of time.
Crypto
Bitcoin
Next stop for Bitcoin could rest at 23,000 and the 261.8% Fibonacci expansion level.
Ethereum
Ethereum is closing in on the 38.2% Fib retracement level around 585.00.
Litecoin
It is possible that Litecoin has broken out of a massive Symmetrical Triangle dating back to January 2018? The measured move from the breakout sits around 500.00 and new ATHs.
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.
Comments