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Tuesday Technicals - 20 Sep 2016

Here's a quick draw 5 macro technical charts (going as far as individual commodities, currencies, bonds, and sectors, as well as the rest of the major indexes and benchmarks). No comments on anything except the technical/price developments. Even if you're not technical analysis minded it's a useful way to keep on top of trends in some of the main financial markets and as a prompt for further investigation...

1. Emerging Market Equities - Bearish divergence and Extreme bullishness

-Short term bearish divergence on EM equities ETF EEM (higher high on price vs lower high on the RSI)

-Longer term there seems to be bearish divergence on price vs the MACD too (see the faint red line on the chart below); also note price seems to have failed at previous support (now resistance) of $38

-Sentiment is looking stretched; the sentix survey of investors shows investors the most bullish on emerging markets since 2012.

Overall technical view: Short-term bearish, watching for a return to support of $35

emerging market equities technical view
emerging markets sentiment

2. Emerging Market Bonds - Bearish divergence

-Emerging market bonds ETF EMB displaying bearish divergence (higher highs on price vs lower highs on the RSI)

-At the same time EMB has put in a 2 year high vs IEF (treasuries), thus at this point it's looking stretched on a relative, or credit spread basis.

-Price has also dropped below the 50-day moving average, thus overall short-term downside risk for EMB is arguably high from a technical analysis perspective.

Overall technical view: Bearish

emerging market bonds chart

3. Junk Bonds - (more) Bearish divergence

-Yet another instance of bearish divergence, Junk bond ETF JNK is showing a short term downtrend in the RSI vs the steady upward march of the price.

-The MACD is also showing a bit longer term bearish divergence, and price is currently just sitting on its 50 day moving average (putting it at a vulnerable point - and a potential trigger for downside movement).

-Also worth noting is that the ratio of JNK to IEF (treasuries) is sitting at the downtrend line after what is so far a failed upside breakout; clearly an upside breakout would be bullish given the upward trend in price, but at this point it's fair to say it looks vulnerable.

Overall technical view: cautious; on-watch for a downside break of 50dma

junk bond etf technical analysis
junk bonds vs treasuries

4. ASX200 - Oversold

-Main Australian share market benchmark the ASX200 has put in a clear oversold signal with the RSI falling below 30 and then turning up; a bullish sign.

-The price rebound of the past week also keeps in tact the uptrend line from the low in February.

-It also happened to bounce off the 200 day moving average; another positive sign.

Overall view: Bullish, looks to be classic 'buy the dip' setup

5. USDCNH - Ascending triangle

-USDCNH (Chinese yuan or Renminbi) putting in an ascending triangle chart pattern.

-At this point 6.70 is clearly the line in the sand.

-Ascending triangle is typically a continuation pattern; thus an upside bias is warranted.

Overall view: 6.70 looks to be at risk, an upside breakout would take it to 6.80

Thanks to and for charts.

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