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...
In this edition we look at a descending triangle in US 10-Year Bond Yields, an ascending triangle in Crude Oil prices, a potential head and shoulders top pattern in the US Dollar Index (DXY), an upside breakout from a symmetrical triangle in Biotech Stocks, and an upside breakout from a bull-flag formation on the Russell 2000 index.
1. Treasuries - Triangle (1/2)
- First of two notable triangles, a descending triangle spotted in US Treasuries
- Measure rule would set initial price target for a downside break of around a yield of 2%, which would still position it around the top end of the previous range.
- Speculative futures positioning also remains stretched to the short side, which would tend to bias the expectation toward a drop in yields from a contrarian standpoint.
Overall technical view: Would expect yields to fall (bonds to rally), but need to see a breakout.
2. Crude Oil - Triangle (2/2)
- The second triangle is in crude oil, in this case an ascending triangle.
- The initial price target would be around $59 a barrel.
- I previously talked about the crunch in volatility for Crude Oil in the commodities special edition of the Weekly Macro Themes, but the implied volatility index for oil has also fallen considerably, and it could be a harbinger of a potential surge in volatility to come... in other words an explosive price move (one way or the other).
Overall technical view: Waiting for the break, bullish bias, could be an explosive move when it gets underway.
3. US Dollar Index - Possible Head & Shoulders Top
- The US dollar index has got the making of a potential head and shoulders top; left shoulder and head have been put in, and a possible right shoulder is in progress; the neckline has support around 99.
- If it follows through and breaks the neckline it could open up about a 4 point move based on the head vs neckline measure rule; that would put the price target around 95 ...right back in the old range.
- Aside from that, the latest rally failed to break upper resistance, and is even struggling with the 101 level, so either way there should be doubts on its strength.
Overall technical view: Bearish bias on the basis of a potential H&S top.
4. Biotech - Breakout (1/2)
- As noted in a previous edition of the Tuesday Macro Technicals, Biotech equities (via SPDR S&P Biotech (NYSE:XBI)) had been trading in a symmetrical triangle. Well wouldn't you know it they've now broken out to the upside.
- The RSI has also broken its minor downtrend, confirming the move.
- It now faces another test in the form of resistance around the $70 level (which served as resistance in early 2015, and support in later 2015), and recent history would suggest it could take a couple of goes before successfully breaking through.
Overall technical view: Bullish, add on compelling break of resistance.
5. Russell 2000 - Breakout (2/2)
- The second breakout is in the Russell 2000 index, where the bull flag pattern on the weekly chart has been completed with an upside breakout.
- The measure rule (flag, which slopes against the previous trend, appears half way up the flagpole) would point to a price target for US small caps at about 1580 (or about a 13% move from here).
- Speculative futures positioning (as talked about in the 16 Dec issue of the Weekly Macro Themes) remains stretched to the upside, as it often does during strong market moves, but has pulled back slightly.
Overall technical view: Bullish
