By J.C. Parets & All Star Charts
1/ Banks Pass the Test
2/ Cruise Lines Set Sail
3/ Miners Lead Bitcoin
4/ Real Yields Challenge New Highs
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1/ Banks Pass the Test
Yesterday, the Federal Reserve Board released the annual bank stress test results, demonstrating that the banking system remains strong and resilient.
Banks are a critical area for the stock market. They’re an excellent risk-on indicator, accounting for the largest weighting in small-cap equity indexes.
After the SPDR Regional Banks ETF (KRE) broke down from a head and shoulders pattern in March to its lowest level since 2020, the price is now coiling.
We’re asking ourselves whether this continuation pattern will resolve in the direction of the underlying trend or if buyers can step in and drive prices higher.
A bullish reversal from this economically sensitive group would bode well for the overall market. On the flip side, we’re eyeing the COVID lows and would expect broader market pressure if this pattern resolves lower.
2/ Cruise Lines Set Sail
Cruise line stocks are catching higher.
Yes, even the former laggards can’t seem to print fresh lows as bullish data points continue to mount in favor of a sustained rally.
Here’s our equal-weight cruise line index reclaiming a key polarity zone earlier this month.
Like any of the strongest groups in the market these days, cruise line stocks have completed a textbook reversal pattern and are making fresh highs.
Seeing some of the hardest-hit stocks find their footing and rally along with the leaders is a clear indication of risk-seeking behavior.
The consumer is strong, and investors could be ready to set sail as bullish tailwinds pick up across the market.
3/ Miners Lead Bitcoin
We’ve been highlighting the impressive relative strength of cryptocurrency stocks over the last few weeks.
They have outperformed their counterparts since Bitcoin (BTC/USD) bottomed in November last year and have yet to show signs of slowing.
The above chart highlights Marathon Digital Holdings (MARA) resolving higher from a short-term continuation pattern while Bitcoin pushes against the upper bounds of its range.
We believe that these two will likely resolve in the same direction and that Bitcoin could follow the miners’ lead.
If and when that happens, it will be a feather in the hat for the entire crypto space.
4/ Will Emerging Markets Follow CEW?
Emerging markets have been on a tear—both equities and currencies.
But the failed breakout in the Emerging Market Currency Fund ETF (CEW) raises concerns over continued emerging market strength.
Check out CEW overlaid with the Emerging Markets Ex-China ETF (EMXC):
Yes, we’re talking about yields. But we see a potential bullish continuation pattern.
While we can’t directly trade the U.S. five-year real yield, an upside resolution would spell trouble for gold and other precious metals.
As long as real rates continue to climb, the near-term forecast for gold and precious metals remains messy for longer.
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Originally posted 30th June 2023
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