By J.C. Parets & All Star Charts
1/ Apple Falls Short
2/ Demand for International Stocks Hits Supply
3/ The Downtrend Persists for Bonds
4/ The Canadian Dollar Can’t Catch a Break
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1/ Apple Falls Short
Apple (AAPL) released its quarterly earnings report, and shares of the tech giant fell more than 4% in today’s session, dragging the market lower.
We’re dealing with a big basing pattern that resolved higher in June, but price is pulling back to former resistance at approximately $183.
While momentum remains in a bullish regime, the 14-period relative strength index (RSI) has been making lower highs with each subsequent price high. Not only is there a massive bearish divergence in place, but momentum is falling off a cliff as of late.
This begs the question of whether this is a simple retest of former highs, where buyers could step in and support price. Or do we have a potential failed breakout brewing, and prices are on the verge of reversing hard to the downside?
If it’s the former and price catches a bid at this level, the market will likely benefit. On the flip side, stocks at the index level could struggle if Apple slides back into its prior range.
2/ Demand for International Stocks Hits Supply
While major U.S. indexes and sectors are running into overhead supply, global equities are too.
Our equal-weight custom index of the most significant international stocks listed on U.S. exchanges illustrates this theme:
As you can see, price is challenging a critical level of resistance that coincides with its former highs of last year and 2021.
Momentum waned as the index made new highs last month, resulting in a potential bearish divergence as price challenges a critical level of interest.
We could see some sideways action as price absorbs overhead supply. However, a breakout could signal a fresh leg higher for equities overseas.
3/ The Downtrend Persists for Bonds
If rates are on the rise—which they are—it means only one thing for bonds.
Lower.
Check out the long-duration U.S. Treasury Bond ETF (TLT) breaking down from a nine-month consolidation:
TLT printing fresh year-to-date lows does not present a bullish development for the bond market.
In fact, it’s quite the opposite.
The last nine months formed a bearish continuation pattern, now resolving lower. More downside action for the bond market seems a higher-probability outcome heading into the end of the year.
4/ The Canadian Dollar Can’t Catch a Break
Major global currencies continue to contend with a strong dollar.
Even commodity-centric currencies such as the Australian and New Zealand dollars turned lower this week despite renewed strength among raw materials.
Canadian dollar futures provide another excellent example:
The Canadian dollar can’t seem to catch a break as it remains stuck below a multi-year downtrend line. The bearish momentum regime on the 14-day RSI doesn’t help the bulls’ case either.
The Canadian dollar and commodity-centric currencies in general could regain lost ground against the U.S. dollar in an environment where crude oil and other commodities resume a leadership role.
For now, Ol’ King Dollar is behind the wheel.
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Originally posted 4th August 2023
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