Chart Advisor: Transports Shift Gears

Articles From: Investopedia
Website: Investopedia

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

Investopedia is partnering with All Star Charts on this newsletter, which both sells its research to investors, and may trade or hold positions in securities mentioned herein. The contents of this newsletter are for informational and educational purposes only, however, and do not constitute investing advice.

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.

Originally posted 27th June 202

Join the Discussion

Thank you for engaging with IBKR Campus. If you have a general question, it may already be covered in our FAQs. If you have an account-specific question or concern, please reach out to Client Services.

Your email address will not be published. Required fields are marked *

Disclosure: Investopedia The comments, opinions and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or to adopt any investment strategy.  While we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described on our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment or strategy. This information is intended for US residents only.

Disclosure: Interactive Brokers

Information posted on IBKR Campus that is provided by third-parties does NOT constitute a recommendation that you should contract for the services of that third party. Third-party participants who contribute to IBKR Campus are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.

This material is from Investopedia and is being posted with its permission. The views expressed in this material are solely those of the author and/or Investopedia and Interactive Brokers is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to buy or sell any security. It should not be construed as research or investment advice or a recommendation to buy, sell or hold any security or commodity. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

Disclosure: ETFs

Any discussion or mention of an ETF is not to be construed as recommendation, promotion or solicitation. All investors should review and consider associated investment risks, charges and expenses of the investment company or fund prior to investing. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

Disclosure: Forex

There is a substantial risk of loss in foreign exchange trading. The settlement date of foreign exchange trades can vary due to time zone differences and bank holidays. When trading across foreign exchange markets, this may necessitate borrowing funds to settle foreign exchange trades. The interest rate on borrowed funds must be considered when computing the cost of trades across multiple markets.