By J.C. Parets & All Star Charts
Tuesday, 27th June, 2023
1/ Transports Shift Gears
2/ Building Materials Rip Higher
3/ Crypto Miners Have the Alpha
4/ Dark Clouds for US Equities
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1/ Transports Shift Gears
The S&P Transportation ETF (XTN) ripped higher today, soaring roughly 3%.
Price is pressing against the upper end of a multi-year base as buyers continue to absorb overhead supply at a shelf of former highs.
Not only is the long-term moving average flattening out, indicating that the primary trend is shifting, but the 14-period relative strength index (RSI) remains near overbought conditions. This means that buyers are getting aggressive as they attempt to take out this resistance zone.
If and when they do, a fresh leg higher from this group of stocks would support a potential rotation into cyclical sectors.
2/ Building Materials Rip Higher
We’re seeing bullish signals for building materials stocks.
The Dow Jones Building Materials Index is printing fresh 52-week highs, completing a rounding bottom formation.
In addition, the 200-day simple moving average is sloping upwards for the first time in well over a year—another sign of a bearish-to bullish reversal.
If that’s not enough enough, the 14-day relative strength index (RSI) recently hit overbought conditions for the first time since last summer, confirming that bulls are in control.
The evidence is stacked in favor of the bulls. Price and momentum suggest that the path of last resistance points higher for materials. As long as that’s the case, we imagine that a healthy rotation churns beneath the surface as the major indexes remain buoyant.
3/ Crypto Miners Have the Alpha
When it comes to cryptocurrencies, we’re witnessing related equities lead the way higher.
The bubble chart below highlights the one-month change on the x-axis and the change since Bitcoin (BTC/USD) bottomed in November last year on the y-axis for Bitcoin, Ethereum (ETH/USD), altcoins, and miners.
Miners are by far the standouts. They have not only booked an impressive gains since Bitcoin bottomed but are also outperforming their counterparts over shorter time frames.
On the flip side, altcoins lie at the lower left side of the chart, making them the laggard area of the crypto complex so far.
This suggests that the alpha continues in the miners while altcoins still have their work cut out for them.
4/ Dark Clouds for US Equities
Emerging market currencies have been in beast mode—except the Chinese yuan.
While analyzing these currencies with exchange-traded funds (ETFs) such as the Emerging Currency Fund (CEW) and its new 52-week highs is essential, we’re more interested in the Chinese yuan.
Why? China represents the world’s second-largest economy. And based on the charts, it could provide valuable insight into the direction of U.S. stocks.
Check out the offshore yuan or Chinese renminbi (USD/CNH):
A steep devaluation in the yuan led the S&P 500 ETF (SPY) lower in 2018 and 2022. Those recent events make it impossible to ignore its 28% decline since January.
Perhaps the Chinese yuan will dig in and reverse higher, supporting the breakout in U.S. equities at the index level.
Or China’s economic outlook via the yuan could be forewarning global investors of further downside action in the coming months.
Either way, new 52-week lows for the Chinese yuan do not bode well for global equities, including the S&P 500.
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Originally posted 27th June 202
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