Tuesday Technicals – 8 November 2016

Here’s the regular 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 (albeit we will typically cover the broader case in the Weekly Macro Themes where the technical and fundamental set up produce a compelling investment idea).  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. Copper – Breakout

-Copper is breaking out from the symmetrical triangle pattern flagged in a previous report.

-Rule of thumb measurement rule for the symmetrical triangle breakout would be a move to 2.70, which would really move the dial and be representative of the kind of movement seen in a trend change. -Speculative positioning is now net long, which is a contrarian bearish signal in a downtrend/sideways market, but is consistent with a bullish breakout and possible trend change. Overall technical view: Bullish, could be the start of a new bull market.

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2. Crude Oil – Just Resting -Crude oil is resting on its nascent uptrend line on the weekly chart.
-This comes after the previously flagged bearish divergence was resolved with a big downside move. -That trend line serves as an important line in the sand as crude oil comes up against negative seasonality (see the chart attached below).

Overall technical view: Neutral, slight bearish bias – which would be confirmed with a downside break.

3. DXY – Short-term oversold

-DXY has established a short-term uptrend and now looks oversold within that trend. -The 97 level has been established as support; 99 presents minor upside resistance, while 100 is a major resistance level, which if broken will confirm the uptrend and will likely be the start of a longer and larger move.

-Oversold signal is coming from the RSI on the daily chart which dropped below 50 and then turned up.

Overall technical view: Short-term bullish, add on upside breakouts.

4. Coffee – Rounding Bottom

-Coffee ETF looks to have put in a rounding bottom pattern on the weekly chart. -At the same time a breakaway gap is in progress, which is also occurring at a key resistance point on the chart, spelling potential for a big bull market. -While the 50 & 200 day moving averages are consistent with a strong up trend, the RSI has moved into the overbought zone as it usually does with this kind of move, it serves as a warning, but is not inconsistent with a strong bull market. Overall technical view: Bullish – has all the makings of a bull market.

5. Bond bust – It ain’t over yet

-Global bond markets remain in selloff mode, this looks like a trend change. -Sentiment has shifted on bonds, with the dominant medium term mood of the market shifting from bullish to bearish, and the chart below from Sentix drives this home. -US treasury yields look to have shifted to an uptrend with yield above both 50 and 200 day moving averages, and the 50 above the 200. While it could face some overhead resistance, odds are it moves higher. Overall technical view: Remain bearish on global bonds.


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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.