Well, the US Dollar continued it's assault on new highs. But more importantly, it is soaring relative to all the other currencies in the Dollar Index. I'll have more on that in a bit, but the market is starting to look a little stretched. The one thing that is concerning is how far we have moved away from the moving averages.
With all of the news from OPEC, Crude Oil ($WTIC) had a massive move this week. This is the highest weekly close since July 2015. The 12% move definitely got everyone's attention. The real debate for December is whether or not it can hold the breakout and keep moving up to $60. The volume was also very solid. That sort of confirmation is very bullish.
This week was a wild week for the Dollar ($USD). It tested 102 but closed the week just slightly higher. However, the breakout last week was confirmed with this week closing higher so the breakout is valid.
I usually look for the $USD to weaken around month end, so this will be interesting to see how it all plays out. If you look at the candles going back to the beginning of 2016, 8 months out of 10 sold off in the last week or the first week of the month. I mention it because the dollar may need to rest a little bit but I still think the big bull is intact.
The US Dollar ($USD) roared to new heights today. It closed at a 13 year high with a rapid surge in the last few weeks.
There is an even larger trend at play as well. If you rest the red trend line on the recent highs, the $USD is breaking out relative to the major previous peak using the 2011-2002 highs as well. I have also shown a dotted line connecting the 1985 peak with the 2002 peak that shows the recent 2-year consolidation taking place above the orange trend line. Which ever trend a chartist uses, the $USD is making a meaningful trend change. Whether it is the horizontal breakout going back thirteen years in Chart 1, the dotted trend line off the 1985 highs or the more shallow trendline including the 2015 highs, the move in the $USD will be one of the biggest factors in the investor landscape for 2017.
For commodity investors, the $USD represents a major headwind. After recently breaking below the 40 year lows, Commodities have struggled to make a meaningful bounce off of these levels. Currently the $USD is slightly above the horizontal level and the 40 Week MA as shown in the legend but the gap is marginal at best. A US Dollar headwind suggests this may mark the start of a meaningful turn down in Commodity price levels below what we have seen previously in our investing lifetimes.
The webinar covered off some alternative ideas for investing if Commodities have a headwind. You can watch the recording by opening this link. Commodities Countdown 2016-11-17. Alternatively, I have included it in the article for your viewing convenience.
Lastly, there are some big events coming up that make this a particularly important place in the market timeline. We have Options Expiration tomorrow which has marked some meaningful turning points. We also have the US Thanksgiving next week marking low trading volumes throughout the week and Thursday/ Friday have the focus elsewhere. We also have the OPEC meeting next week which adds volatility more than anything. The Italian Vote regarding the EU is December 4th and then the Fed meets for the December meeting where a rate hike is expected. Immediately following the meeting is the December quadruple witching day for Options. On Tuesday I laid out one of my recent global market reviews. The Canadian Technician Webinar 2016-11-15. My webinars are to help investors see some of the macro trends as well as the market rotation. Hopefully they help in formulating some ideas for 2017.
As I mentioned above, the webinar covered off some brighter areas than the commodities currently and I would encourage you to let it play if you are looking for themes. I tried to build some optimism with better investment strategies than going long commodities in the face of a rising dollar. You can always forward these articles on to friends and family.
I would like to take this opportunity to wish all of our US readers a happy, warm, safe holiday next week. As many of you start travelling for the Thanksgiving weekend, best wishes for a great holiday.
Greg Schnell, CMT, MFTA.
When the financial press starts discussing Copper we should all perk up. However, it is after a 24% rise. So what should we do now?
Well the chart below suggests sell it if you own it. Trying to capture 25% every month is hard to do. We are up against the 5-year channel. How you choose to trade it is obviously important, but I would suggest this is too late to enter.
Everyone seems to be on board with a December rate hike. US, Canadian and European financial stocks are all shooting higher. Arthur Hill pointed out some interesting action in the financial sector. Defence stocks, Insurance, financials, healthcare, private prisons, biotechs are running while the Nasdaq tech stocks are getting crushed. Is this just political posturing or is it something more?
The market is aggressively changing positions. Today shows a massive push down in AMZN, FB, NFLX, GOOGL, AAPL.