Monday, May 30, 2016

Week in Review: U.S. Dollar ($USD UUP), Energy (XLE), Biotechnology (XBI), Emerging Markets (EEM), Russia (RSX), and Financials (XLF)

This past week has been a little rough with weekend on-calls at the hospital and e-Portfolio's due soon so that's the reason for not writing much lately. My apologies, but not a moment too soon as some interesting developments have occurred in the last 72 hours. The U.S. jobs report (if I recall correctly) came in a little more disappointing than people were expecting and despite this Mrs Yellen signaled the possibility of a June rate hike.

My theory now with this "warning shot" of possible June rate hikes means a lot of what happens over the next few months depends on what happens to the U.S. dollar as any rate hike in the Dollar makes things more expensive.

U.S. Dollar: $USD UUP
My call of a bullish declining wedge some time ago was bang on and we have since seen a breakout. Near-term upside exhaustion has meant we have seen a bit of a pull-back and I expect this to continue for the coming week. Support should be at EMA(34) at the most but now a downward channel has appeared which has indicated to me that any break above the channel resistance line should take us to 97.75. The proximity of the U.S. dollar to this resistance line is playing out in other equities as I shall demonstrate below.
Energy: XLE
Energy has been in a great ascending channel and has a good run since the beginning of the year. Unfortunately though a second tap on the lower channel support line has gone in while simultaneouslybeing rejected at an upward horizontal resistance line of $68.00. It's currently stuck in a condensing pattern that's perilously close to the edge of the channel. Things seem pretty bearishly set-up for Energy.
Biotechnology: XBI
This head-and-shoulders pattern hasn't quite played out the way I imagined but it too hasn't been able to make any significant headway so getting over-bough near term on Wednesday. I expect XBI to continue in this horizontal pattern for now.
Emerging Markets: EEM
EEM has now come into contact with a resistance line forming a suspected declining wedge. This might go all the way back to wedge support line. The real question in the long run though is, "will this breakout above $35.50?
Russia: RSX
I continue to be quite bearish on Russia and the reason I think stems from the possibility of a poor set-up in the Energy market. It's come into a great deal of resistance in the $17.50 area and now a declining triangle has appeared.
Financials: XLF
Slope of Hope was the first to comment on this I believe and then I began noticing it too. We have a strong ascending channel which already has a second tap on the support line plus rejection over-head at $23.80 which we have to see a move above in order for the pattern to continue. Like Energy (XLE) we are quickly running out of space on the channel for this move to happen.