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)

This Tiger Cub Giant Is Betting On Banks And Tech Stocks In The Recovery

D1 CapitalThe first two months of the third quarter were the best months for D1 Capital Partners' public portfolio since inception, that's according to a copy of the firm's August update, which ValueWalk has been able to review. Q2 2020 hedge fund letters, conferences and more According to the update, D1's public portfolio returned 20.1% gross Read More


-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

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

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

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 StockCharts.com and Investing.com for charts.

Previous editions:

Tuesday Technicals – 13 September 2016

Tuesday Technicals – 6 September 2016

Previous articleHorseman Japanese US Reit Fund – An Update
Next articleFor Gold Bulls Can a Sell-Off Be a Good Thing?
Topdown Charts: "chart driven macro insights" Based in Queenstown, New Zealand, Topdown Charts brings you independent research and analysis on global macro themes and trends. Topdown Charts covers multiple economies, markets, and asset classes with a distinct chart-driven focus. We are not bound by technical or fundamental dogma, and instead look to leverage any relevant factor to capture the theme. As such, here you will find some posts that are purely technical strategy, some that just cover economics and data, and some posts that use multiple inputs to tell the story and identify the opportunities. Callum Thomas Head of Research Callum is the founder of Topdown Charts. He previously worked in investment strategy and asset allocation at AMP Capital in the Multi-Asset division. Callum has a passion for global macro investing and has developed strong research and analytical expertise across economies and asset classes. Callum's approach is to utilise a blend of factors to inform the macro view.