On August 4th, I wrote 5 Troubling Charts, where I said that "from a macro perspective, there are 5 key charts that I find troubling..." Six weeks have passed and I thought it worthwhile to see how things have changed (all charts courtesy of StockCharts.com, 9/15/19).
The first chart is a weekly Copper ($COPPER) chart. The neckline of a head-and-shoulder pattern was triggered, but has since reversed, possibly negating the pattern. As we know, a broken/failed pattern can be an even stronger signal than the original pattern itself. It is also noteworthy that, for the past several weeks, the Commitment of Traders Report showed "smart money" hedgers at a record long futures position versus large speculators being at a record short position. If Copper can move higher, large specs could find themselves caught in a short squeeze.
Next up is the Wisdom Tree Continuous Commodity Index Fund (GCC), which tracks the Thomson Reuters Equal Weight Continuous Commodity Total Return Index. GCC broke to new lows and has since started to rebound, which could be a bear trap if prices continue higher. Seeing GCC trade above its 50-week EMA would add support to the view that a low has been seen.
Next up is the Australian Dollar ($XAD), often referenced as a commodity currency. The 2019 low could be a false break of the horizontal support and turn out to be a bear trap.
The US 10-Year Treasury Yield (TNX) has had a stronger reversal off it lows than the assets charted above did:
Finally, the Dollar index ($DXY, $USD) continues to hold near multi-year highs, but has a large negative divergence between price and both RSI and MACD:
As I said in the 8/4 report, "I am firmly in the inflation camp, but I do worry that, short-term, we could see some sort of deflationary panic. It's hard to ignore the global slowdown, as most global data points show slowing growth and slowing inflation." Maybe the inflation mindset is taking hold. There is now over $1.7 trillion of negative-yielding bonds globally and the amount of assets purchased by the big five central banks (Fed, ECB, BoJ, BoE, SNB) since 2009 totals $12.4 trillion. We are clearly in uncharted waters at a global macro level. I will continue to focus on how things trade, not what I want to see – something that is more important now than ever before.
Thanks for reading. I welcome comments and questions as we try to navigate our way through these historic times: email@example.com
Tim Taschler, CMT
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