It was another busy weekend for the Yinzer Analyst, this time celebrating the victory of my University at Buffalo Bulls over Central Michigan in the Mid-Atlantic Conference. Like every alumni, I’m proud of my school but only when it wins and we’re talking about Buffalo here so wins are few and far between. I might have to do join all the other alums in buying a tee shirt. If the Buffalo Bills ever make it to a post-season the whole city might just go up in flames. What would we do without all the empty buildings and grain silo’s?
But even with the big win, there’s always time for chartology with the Yinzer Analyst and this week is going to be a big one with the FOMC meeting on Tuesday and Wednesday where we could be treated to a serious change in language with the Fed’s “patience” finally coming to an end. Traders of all stripes certainly aren’t taking any chances as it was all dollar, all the time last week and woe unto any who though to get into the unhedged international equity game (like yours truly with EZU.) But on a weekly basis UUP is clearly in a bump and run formation as every trader goes long at the same time. What happens after the FOMC meeting ends on Wednesday? Even if the Fed’s patience is about to run out, is the dollar guaranteed to rise even further? And does this dollar run strike anyone else as more than a little extreme?
And if the dollar is rising, than the Euro is falling and FXE is back to levels not seen since…well…ever in the history of FXE.
The rise of the dollar has also put a crimp on unhedged European equity performance with EZU down 1.16% last week compared to the strong 2.15% showing from its hedged counterpart. But while the performance wasn’t anything to brag about last week, EZU has found support along its 50 day moving average at $37.24 and just above a significant level of prior support between $36.50-$36.75.
Looking at the weekly charts, EZU did manage to get off the lows of the week but not enough to keep the CMF score from falling. And on a relative momentum basis, EZU doesn’t look like it’s going anywhere until this week’s FOMC meeting is finished.
But the rise of the dollar has delivered more whammies than to just the Euro, check out the PowerShares DB Commodities Index Tracking Fund (DBC):
And the Wisdom Tree Commodity Country Equity Fund:
Or even the good old Market Vectors Gold Miners ETF (GDX) which is still stuck in a downtrend channel with no hopes for ignition with a rate hike looming this summer.
And finally let’s not overlook the Energy Sector Select SPDR (XLE) which also has fallen back into a downtrend channel as the spot price of crude fell below the 2015 low.
But to wrap it up here at home, SPY is fighting the good fight at $206 and momentum might roll over in the next day or two if early signals from the Fed can convince the market that a rate hike doesn’t mean the end of this economic cycle even if the language does change in the next release. On a weekly basis the market looks ready to retest the lower boundary of the ascending wedge but a positive spin on Wednesdays release could send it back the other way.
And switching gears to long-term Treasury’s, TLT has made a solid effort to put in a bottom at $126 on the daily chart but the fund hasn’t retested the 2014 uptrend line on a weekly basis and leads me to wonder if we’ve seen the end of the weakness in the market.
That’s all for tonight folks, good hunting out there tomorrow.