The Relative Rotation Graph above shows the relative rotation, on a weekly basis, for the G10 currencies using the USD as the base.
For a better understanding of how to use RRGs to monitor currency rotation please refer to this blog article on the subject.
Looking at the RRG above there are two things that catch my eye.
The first thing is the fact that ALL nine currencies on the RRG canvas (the USD is the tenth currency and the base/benchmark for this RRG) are positioned on the right-hand side of the plot indicating general weakness for the USD against all other currencies. Or strength for the major world currencies versus the US dollar, just a matter of how you want to look at it ;)
The second observation is the long orange tail on $JPYUSD heading lower inside the weakening quadrant and heading for lagging. This means that the JPY rapidly started weakening against the USD over the past five weeks (closely followed by the second in line $GBPUSD), more or less going against the tide which makes it an interesting currency to watch more closely.
We could stop here and simply put on a short USD/JPY trade but if I can find another currency moving opposite of $JPYUSD I can profit from the "scissor" move on both sides of the strength/weakness versus the USD.
Currencies that fit this requirement would be NZD, CAD, and AUD (NOK to a lesser extent as it is already moving flat). As AUD seems to be just starting its move it most likely has the best potential left. The NZD, for example, has already made a big move.
To find out if such a trade makes sense we need to bring up the $AUDJPY chart:
The big downtrend spanning two years from late 2014 to late 2016 is clearly visible and so is the break in November 2016. After an initial rally, $AUDJPY peaked around 88 (three attempts) which makes it the resistance level to watch in coming weeks.
A break beyond JPY 88 will confirm the current strength AUD/JPY and very likely trigger an acceleration higher!
Expeditors International (EXPD) is a Large-Cap stock with a consistent chart pushing to new highs year after year. With all the attention to charts that swing and sway, this one seems to have a consistent trend of delivery shareholder profits. While its not a rapid rise in capital, the SCTR shows it to be a middle of the pack stock with readings between 30-70. This week the stock looks to be breaking to higher highs.
The Lithium ETF has been climbing for a while, but recently it broke above some significant long term resistance. The chart is breaking out above the 4-year base at $28 and the current bounce looks set to push it to new 5 year highs leaving the base behind. Whether you use a Head/Shoulders base at $26 or the broader top at $28, this looks like it plans on continuing.
Of course, Lithium is required in electric batteries. With all of the Tesla publicity, and all of the car companies trying to use the word 'Electric' in every marketing sentence, it seems natural that this continues to be in demand.
If your portfolio needs a spark, perhaps the Lithium ETF can help.
Greg Schnell, CMT, MFTA
Higher treasury yields ($TNX) are feared in some parts of the stock market like utilities (XLU), but not in others - especially in banking ($DJUSBK) and life insurance ($DJUSIL) where profits tend to soar during periods of rising interest rates. The recent spike in the 10 year treasury yield ($TNX) from 2.10% to 2.40% has lit a fire under both of these industry groups and, given the Fed's desire to unwind its bloated balance sheet and to stay ahead of potential inflationary fears, I see the TNX rise continuing. That should bode well for the DJUSIL, which broke out last week to an all-time high:
Bull markets are comprised of rotating sector strength and bullishness. On a relative basis, healthcare (XLV) was a laggard during 2009 and 2010 before outperforming in a major way from 2011 through 2015. The sector saw relative weakness for nearly two years beginning in mid-2015, but has now resumed its relative strength. In fact, I believe the breakout above relative downtrend resistance marks the very early stages of another relative push higher in healthcare stocks, particularly biotechnology stocks ($DJUSBT). Take a look at the chart:
Goldman Sachs (GS) appears to be ending its correction as it bounces off the rising 200-day moving average. The chart shows GS hitting a 52-week high in March and then declining into June. I consider this a correction because the stock was entitled to a pullback after a massive advance and it retraced around 38.2% of the prior move. Goldman found support near the rising 200-day SMA and turned up the last six weeks with a move back above its 50-day SMA. A move above 230 would break a resistance zone and argue for a challenge to the March high. The indicator window shows the price relative (GS:SPY ratio) turning up as well and close to a breakout. As the highest-priced stock in the Dow, Goldman Sachs carries the most weight and a breakout in this stock would be positive for the Senior Average.
Thanks for tuning in and have a great day!
--Arthur Hill CMT
Plan your Trade and Trade your Plan
The Energy SPDR (XLE) continues to firm after an extended decline and RSI could trigger a bullish signal this week. On the price chart, XLE shows signs of stabilization with an outside reversal five weeks ago and an inside week last week. Notice that XLE is firming near support from last summer's lows and near the 50% retracement. XLE bounced early this week and move above 67.5 would trigger a breakout.
The Dow Jones U.S. Semiconductors Index ($DJUSSC) is an extremely volatile index. When this index is trending higher, there aren't too many better places to be invested. But when the fire goes out, you want to run, not walk, for the exits. So where are we now, after a month of blood-letting in the space? Should we be entering or should we be running away?
Nike (NKE) popped up 8% this morning on earnings right at the mid point of the year. Nike accelerated straight up for 3 years before topping in 2015. After retracing 20%, the stock tried to climb and it looks like its working to take the lead.
The chart is setting up two classic patterns. The first is a breakout through a downtrending line. The second is the horizontal support/resistance area at $57.70 looks pretty important to get through. You'll also notice the blue dashed line also represents a neck line for a head and shoulders base.
To all the Canadians out there, Happy Canada day 150, and to all the American readers out there, Happy July 4th!
Greg Schnell, CMT, MFTA