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5 Charts: Oil Coiling, EM At Key Test, Bullish Small Caps

By Callum ThomasMarket OverviewJan 31, 2017 05:58AM ET
5 Charts: Oil Coiling, EM At Key Test, Bullish Small Caps
By Callum Thomas   |  Jan 31, 2017 05:58AM ET
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Here are the regular five 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 the range compression in Crude Oil, a bull flag setup in the Russell 2000, a key test for Emerging Markets, a symmetrical triangle formation in Biotech, and a bottom in Turkish Equities.

1. Crude Oil - Range Compression

  • WTI crude oil is trading in a small symmetrical triangle formation.
  • Range compression can be seen in the squeeze in Bollinger® Band width and Average True Range to the lowest point than since the oil crash started.
  • Could be described as "coiling" and getting ready for a large move, the old saying "low volatility is often a good predictor of future higher volatility".

Overall technical view: WTI crude oil is undergoing range compression and a big move is likely soon

Crude Oil Daily
Crude Oil Daily

2. Russell 2000 - Bull Flag

  • Bull flag setup (price moving against prevailing trend in a narrow range)
  • Using the November low as the base of the flagpole would suggest a price target of around 1600
  • Speculative positioning remains stretched to the upside (as discussed here), albeit the last time it was towards the current levels was the start of the 2013 breakout.

Overall technical view: Bullish bias, bull flag serves as a trigger

RUT Weekly 2014-2017
RUT Weekly 2014-2017

RUT Price vs Speculative Positioning
RUT Price vs Speculative Positioning

3. Emerging Market Equities - A Key Test

  • Emerging market equities (via iShares MSCI Emerging Markets (NYSE:EEM)) brushing up against resistance.
  • Resistance line is very important, already failed once, previously served as support; a breakout will open up the next wave up.
  • Hhowever, relative performance vs the S&P 500 is trending down and diverging, which suggests a bearish bias, but again it provides an important line in the sand.

Overall technical view: Skeptical, but an upside breakout will be very bullish

EEM Weekly 2014-2017
EEM Weekly 2014-2017

4. Biotech - Triangle

  • Symmetrical triangle spotted on biotech weekly chart (via SPDR S&P Biotech (NYSE:XBI)).
  • Chart pattern can function as a reversal or continuation; go with the breakout.
  • On the daily, price is still comfortably above the 200 day moving average but chopping around the 50; a break of the 200 would help with confirmation of any downside breakout from the triangle.

Overall technical view: Neutral, wait for a breakout

XBI Weekly 2014-2017
XBI Weekly 2014-2017

5. Turkey - Bullish Divergence

  • Bullish divergence suggests the bottom is in for Turkish equities (via iShares MSCI Turkey ETF (NYSE:TUR)).
  • Lower lows on the price and higher lows on RSI and MACD (classic bullish divergence)
  • Price has also just broken through the 50 day moving average, potentially opening up a move towards the 200 day moving average, resistance of 37.

Overall technical view: Bullish (risk management is a break back below 50dma and support of 32)

TUR Daily
TUR Daily

5 Charts: Oil Coiling, EM At Key Test, Bullish Small Caps

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5 Charts: Oil Coiling, EM At Key Test, Bullish Small Caps

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