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Tuesday Technicals - 18 October 2016

Here's the regular 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. US Dollar Index (DXY) - Breakout

-US dollar has broken out of the dual triangles formation pointed out previously.

-The move is already at the target price for the smaller triangle, but it could just as easily go on to test the 100 point level once more; a test that will be very tough.

-Preference would be to start fading the move at this point given the history of false or limited breakouts, and the extent of the move so far and the transition from trending to ranging.

Overall technical view: Short-term low conviction bearish as move looks close to done.

2. Bonds - The Breakdown

-As noted last week, bonds are on the move.

-Treasuries ETF, TLT is at a critical point right here, a touch of the 200 day moving average would be an opportune point to find a floor and resume the uptrend; but a downside break will open up a further move.

-Looking at global sovereign bond market breadth, it looks like this is another bond market "tantrum" and could run further yet if the previous two episodes are anything to go by.

Overall technical view: Remain bearish, but some signs of oversold conditions.

3. Shanghai Composite - Ascending Triangle

-Shanghai Composite appears to be putting in an ascending triangle pattern.

-Likely a reflection of gradually exhausted selling pressure following the bursting of the stock market bubble, with the 3100 level proving hard to break so far.

-A breakout would likely take it towards 3400.

Overall technical view: Resistance fairly well defined, a break will be very bullish, but not guaranteed.

4. Japanese stocks - Golden Cross

-Hedged Japanese equities ETF DXJ has just seen a "golden cross" on the daily chart (50 day moving average crossing above the 200 day moving average).

-At the same time it is sitting right at a key resistance line established over the past couple of years.

-This could be the beginning of a major move, but it will need to convincingly clear that line first.

Overall technical view: Bullish bias, watch for a break.

5. Biotech - Breaking down

-Currently testing its longer term trend line on the monthly chart; a very important test.

-On the daily chart bearish divergence resolved to the downside, followed with a downside break of the 200 day moving average, putting support of $250 into play.

-It looks like the ongoing process of the biotech bubble bursting.

Overall technical view: Remain bearish; watch support of $250 and the long term trend line on the monthly.

Thanks to and and for charts.

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