The Dollar Down Under 2

To my surprise, the US Dollar (USD) failed to hold its longer term uptrend and broke down through a 2 ½ year consolidation last month. Its swift decline set up a rally in other currencies, including the Aussie Dollar (AUD) as you can see in the chart below.

Since the breakout, the AUD has rallied to just under prior resistance. If the USD continues to remain weak and the AUD can break out above current resistance, the upside target (which I have labeled as T1 on the chart) is near the 2014 highs, a compelling 12-15% upside from where it closed yesterday.

Australian sovereign bonds tend to pay a healthy premium to their US counterparts so those looking for yield could investigate them for a fit into their portfolio. Along with the higher yield, investors, by way of exchange rate risk, would be able to receive not only the out-sized yield but the potential of the capital gain if the upside target on the above chart were met. Of course, that same exchange rate risk can be a headwind if the USD were to reverse its lower trajectory and push other currencies, including the AID lower so it is critical you have a well scripted management plan if you elect to venture ahead.

The final months of 2017 should be very interesting for those playing in the currency markets as the USD (and by default its relationship to all other currencies) will be dictated by not only our Federal Reserve policy changes and whatever the current administration can enact. While no one assumes the current administration will be able to accomplish anything, I am very wary of accepting this position as I have learned that when the majority are on one side of an opinion, it is best to be on the other, especially when it comes to investing since the majority are almost always wrong.

August 2017 Charts on the Move Video

For those who were lulled to sleep with August's market action, seasonality says it time to sit up and pay attention since September is historically the weakest month of the year for stock returns. Weak or not, we are in the midst of a powerful bull market so plan accordingly.

August's video link is below.

https://www.youtube.com/watch?v=0PfC6I2wVE4&t=6s

July 2017 Charts on the Move Video

With the markets and investors apparently lulled into a bullish induced coma (not unlike what happens to Homer Simpson when he sees doughnuts), seasonality tells us to expect more of the same for August. Instead with the extreme levels of complacency,  extended price levels, this would be an ideal time for investors to revisit their management plans ... justin case.  

My July highlights in the video link below.

https://youtu.be/JlYFRKRhA6Y

June 2017 Charts on the Move

With the first half in the books, where are we headed?

Let me know what you think. My current thoughts can be viewed in the video link below

https://youtu.be/jo5X7DBkJBE

Will JP Morgan Lead Banking Stocks Lower?

The chart of JPM below mirrors that of the banking sector ETF, XLF. A tremendous rally off of the Trump election, enough to create a very overbought condition closing out 2016.  Since that point, it attempted to rally after a small pullback and actually reached new yearly highs in March.  But on that push, negative momentum was formed and the stock has been grinding lower ever since. As you can see JPM has gone nowhere (dead money) for the past 6 months and has formed a bearish head and shoulders reversal pattern.  If the pattern were to play out its target is labeled T1 on the chart some 12% below todays close. T2 is a support level of significance if T1 does not stick and the market continues to sells off.

As investors in any region of the world, we always want to see banking stocks in healthy up-trends, making higher highs. While JPM’s price is still above a rising 200 day moving average, it formed a new intermediate term lower high and lower low warning of a potential trend reversal. Any play out of the bearish head and shoulders pattern would make huge dent in the bullish case for banking stocks. 

As goes JPM, so goes the banking sector.

It’s important to know that head and shoulders patterns which are over-hyped up by the financial media’s lack of understanding of technical analysis and constant need for headlines. When these patterns do actually play out they are a thing of beauty and can be quite profitable for those short. But the fact is these pattern either don’t materialize or fail the majority of the time. Why? its because historically stocks have spent 70-80% of the time either moving sideways or higher and this pattern is a marker for stocks moving down. Back to JPM, from a purely mathematical standpoint we have higher statistical probabilities a decline will NOT materialize. Nevertheless whenever these patterns develop they should not be ignored as they are a warning sign and we need to be concerned just in case it turns out to be one of those 20-30% possibilities.