ChartWatch Weekly Insights: ASX 200, uranium, iron ore, copper, lithium & more

ChartWatch Weekly Insights is a technical analysis overview of last week’s key major global markets moves. Full of trend and price action analysis, plus identification of key levels, it’s a handy roadmap for investors to start the week!

Major market moves for the week ending 12 January 2024

Aussie stocks

S&P/ASX 200 (XJO)

The XJO techincals are finely balanced, but there are plenty of indications to suggest the uptrend can continue

ST/LT Trends: ⬆️/⬆️

Price Action: ⬅️➡️ (i.e., higher peaks & lower troughs)

Candles: ⬜⬛

View: It was a quiet but important week on the S&P/ASX 200 (XJO). The week’s range was set Monday’s low and minor point of demand at 7441 and Tuesday's high of 7542, i.e., 101 points or 1.3% – making it the smallest weekly range in 6 weeks.

It feels like a fairly typical consolidation week after the strong gains through November and December – and it’s usually a good sign when a market hovers just below its highs after a big run-up.

Price action could be better, though, and the continued lack of a clear demand-side response from the crucial 3 January major supply candle is a nagging concern. Still, 9 January’s demand-side candle is encouraging, and while the price continues to close above the minor low it set at 7441, the short-term uptrend remains intact. The short-term trend ribbon should also provide dynamic support.

A close above 7542 confirms excess demand has returned in the short term – preferably with a large white candle and close near the high of the session. Longer term, if the XJO can close above the all time high of 7633 set way back in August 2021, it could set 7500-7600 as an excellent base from which to probe new highs towards 8000.

S&P/ASX 200 Financials Sector (XFJ)

Pick of the bunch? The powerful Aussie Financial sector could be the key to the next leg up for the XJO

View: The XJO’s second-largest sector by market capitalisation appears to be in a well-established, short-term uptrend as the long-term uptrend is re-establishing. Price action is healthy, and candles tending towards the demand side. The XFJ contains banks like ANZ, CBA, NAB, Macquarie (MQG), and Westpac (WBC), as well as insurers Suncorp (SUN), QBE, and IAG.

S&P/ASX 200 Sector Trends

ASX sectors technical trends

View: Strong uptrends persist in Discretionary (XDJ), Financials (XFJ), Healthcare (XHJ), Property (XPJ), and Telecoms (XTJ). Energy (XEJ) is potentially a developing uptrend to watch, while short-term uptrends in Materials (XMJ) and Gold (XGD) are under some pressure. The Staples (XSJ) short-term trend appears to be turning down to realign with its long-term downtrend, while Utilities (XUJ) is at risk of its long-term trend turning down convincingly.

International stocks

FTSE China A50 Index

Chinese stocks are at risk of breaking through key technical support

ST/LT Trends: ⬇️/⬇️

Price Action: ⬅️➡️ (i.e., higher peaks & lower troughs)

Candles: ⬛

View: The FTSE China A50 index contains 50 blue-chip Chinese companies and is one of the key proxies for the strength of the Chinese stock market. The technicals are clearly skewed to excess supply here, and if the A50 should close below the 21 December low of 11003, there’s little in the way of clear technical support until the January 2019 low of 10192.

NASDAQ Composite Index

NASDAQ bulls reasserted themselves in the daily candles last week

ST/LT Trends: ⬆️/⬆️

Price Action: ⬅️➡️ (i.e., higher peaks & lower troughs)

Candles: ⬜

View: It was a solid week for the NASDAQ composite with Monday’s, Tuesday’s and Wednesday’s white candles signalling a welcome resumption to the short term uptrend begun back in November. Thursday’s candle showed some indecision with some early supply, but the bulls swept back in by the close to rescue the day – and the short-term trend!

With the short-term trend ribbon doing its job – that is, offering dynamic support on the way up – and with price action largely intact, I have few indications the prevailing uptrend cannot continue. I would, however, watch closely for any supply side candles that may appear around the 28 December high of 15150. It would not be a good sign for the bulls if we see a lower peak set beneath this level.

Commodities

Uranium

The internet just ran out of rocket emojis to describe the uranium chart, oh, wait, 🚀 – found one!

ST/LT Trends: ⬆️/⬆️

Price Action: 📈

View: I covered this one in detail in this article I wrote last week. Needless to say, as a trend follower, you’re only going to hear me say good things about the uranium chart! It is a picture of excess demand, great trends, and great price action. With nothing in the way of major supply points until the 2007 high around US$153/lb, I can’t see anything in the technicals to suggest the prevailing short and long-term uptrends in the uranium price are about to end any time soon.

Copper

Copper has struggled recently, possibly in step with a downturn in Chinese stocks

ST/LT Trends: ➡️/⬇️

Price Action: 📉

Candles: ⬛

View: Given the state of the Chinese stock market, it’s probably no surprise the copper chart (and the iron ore chart, below) is looking a little soggy. The short-term trend is rolling back to down, realigning with the long-term downtrend. Worse, the price action has swung back to lower peaks and lower troughs, and the candles are exclusively supply-side since the 27 December peak.

Thursday’s and Friday’s upward-pointing shadows, terminating at the long-term trend ribbon, suggest that ribbon is again acting as a dynamic resistance zone. In summary, this chart shows increasingly convincing indications that excess supply creeping back in both the short and long term.

Iron Ore – Shanghai

Iron has enjoyed a strong seasonal period, we told you so!

ST/LT Trends: ⬆️/⬆️

Price Action: ⬅️➡️ (i.e., higher peaks & lower troughs)

Candles: ⬛

View: Iron ore was down nearly 4% in Shanghai during the week as the seasonal rally which we flagged in this article in November, and this article in December appears to be under modest pressure. We’ve seen dips like this back to the short-term uptrend ribbon before, and each time the price action resumed higher peaks and higher troughs soon after – so, all is not lost!

Friday’s low of 948 is the crucial technical point now. I suggest a close below this price would signal the supply side has gained control of the iron ore price – at least in the short term.

GFEX Lithium Carbonate Futures

Bumping along the bottom…

ST/LT Trends: ⬇️/N/a

Price Action: ⬅️➡️ (i.e., higher troughs & lower peaks)

Candles: ⬜⬛

View: The phrase ‘dead cat bounce comes to mind!’ There clearly remains substantial supply pressure around the RMB 110000/mt – RMB 113800/mt zone. However, I can see an increasing frequency of demand-side candles since the major low of RMB 85400 set on 6 December – which means don’t write the demand side off just yet!

As the price action compresses within the range set by the two abovementioned bounds, the technical picture becomes clearer: A close above RMB 113800/mt demonstrates the demand side has wrestled control, while a close below RMB 85400/,t would spell disaster for lithium bulls.

Between these key limits, bulls should cheer a close above the minor peak at RMB 110300/mt while the bears should cheer a close below RMB 95500/mt.

Bonds

US 10-Year Treasury Note Yield

The most important and the most interesting chart in today’s ChartWatch!

ST/LT Trends: ⬇️/➡️

Price Action: ⬅️➡️ (i.e., higher peaks & lower troughs)

Candles: ⬛

View: The bond market represents the most important market on the planet because it sets the price of money – and the price of money sets the prices of all other assets. Ignore the bond market at your peril!

So, what’s the bond market telling us this week? Well, the price of money got a little cheaper, that is, the yield on the benchmark US 10-year Treasury Note declined about 11 basis points or 0.112%. “Big deal”, I hear you say! Well, considering the US Federal Reserve usually deals in 0.25% hikes or cuts, the market cut rates for borrowers and investors by nearly half that.

Lower rates help facilitate global economic growth, that’s good for commodity and stock prices, but more importantly, lower rates help stimulate the animal spirits required to drive the demand and limit the supply of risky assets!

Not only is this the most important chart in today’s chart deck, I feel it’s the most interesting as well. This is such a key level for the US 10-year T-Note yield. You can see how the price action is struggling to return above the long-term trend ribbon, that is, the long-term trend ribbon has transitioned from offering dynamic support on the way up to offering dynamic resistance on the way down. Also, the long-term trend ribbon is rolling over, indicating a long-term trend change is approaching.

Last week’s supply-side candles are potentially setting up for another push lower in yields. A close below the 27 December low of 3.78% would confirm the new long-term downtrend, and assuming we’re not about to plunge into a recession – this would likely be good for stocks!

Crypto

Bitcoin

Copper has struggled recently, possibly in step with a downturn in Chinese stocks

ST/LT Trends: ⬆️/⬆️

Price Action: ⬅️➡️ (i.e., higher peaks & lower troughs)

Candles: ⬛

View: Bitcoin stole the limelight in terms of major news in crypto during the week, but as you can see from the chart, it could not live up to the hype. As is so often the case in bitcoin (and in crypto more generally), we saw the good news of the approval of 11 Bitcoin ETFs trigger a bout of short-term excess supply.

Thursday’s upward-pointing shadow, and Friday’s black candle selloff, are strong indicators of short-term excess supply. Worse, they’ve closed the Bitcoin price below the short-term uptrend ribbon. The zone of support now is the range set by the 11 December low at 40132 and the 3 January low of 40490. A close below here would seal the deal on short-term trend change. No issues with the long-term trend, though.

Carl’s Technical Analysis Methodology Key

Trends:

ST Trend ribbon: 21 & 34 EMAs || LT Trend ribbon: 144 & 233 EMAs

⬆️ = Uptrend, the ribbon is rising indicating a higher probability the market is in a general state of excess demand

⬇️= Downtrend, the ribbon is declining indicating a higher probability the market is in a general state of excess supply

➡️ = No trend, the ribbon is flattening indicating a higher probability the market is in equilibrium

Price Action

📈 = Rising peaks and rising troughs indicating buy-the-dip activity and supply removal (i.e., indicating a higher probability market is in a general state of excess demand)

📉 = Falling peaks and falling troughs indicating sell the rally activity and demand removal (i.e., indicating a higher probability market is in a general state of excess supply)

⬅️➡️ = Neither of the above scenarios, market price action is indecisive

Candles

⬜ = Predominantly demand-side candles in the recent past, i.e., white bodies and or upward-pointing shadows (i.e., indicating a higher probability market is in a general state of excess demand)

⬛ = Predominantly supply-side candles in the recent past, i.e., black bodies and or downward-pointing shadows (i.e., indicating a higher probability market is in a general state of excess supply)

⬜⬛ = Mixed, i.e., indicating no discernible trend towards demand-side or supply-side candles in the recent past