A Look at a few Charts

Our friend T.R., who has constructed the gold-silver ratio adjusted VIX, an excellent indicator for timing short term peaks and lows in stocks, has provided us with a few annotated charts that show that a number of markets are very close to important support and resistance levels. Note that some of these charts are about a week old, but this doesn’t alter the message and doesn’t matter much since they are all very long term charts anyway.
In some cases, these levels have already given way. In some markets it should probably be expected that a short to medium term counter-trend reaction is imminent, while others seem likely to break these levels.
One very interesting chart is the first one, which compares 5-year US inflation break-evens to the MSCI emerging markets index. There has been a very close correlation between the two data series, and inflation break-evens have recently broken through a support trend line:

5 year US inflation break-evens and the MSCI EM Index

Next a chart of Brent crude – this snapshot was taken on January 5, and the market has in the meantime broken below the long term support level shown on the chart. The break is still small, so it may possibly still be reversed:

Brent crude, with long term uptrend line and resistance levels

Next the US dollar index, which we have discussed extensively in these pages lately. As can be seen, it has broken above a number of fairly long term downtrend lines, but is approaching a lateral resistance level that dates back to the 2005 peak.

DXY has broken above a number of downtrend lines, but is now at a lateral resistance level 

Next up, the euro, which is the largest component in DXY (approx. 57% weight) – not surprisingly, the euro is hugging support now:

The euro has reached a support zone which may produce a counter-trend bounce 

The next chart is a long term chart of 10-year US treasury note yields and suggests that there is still room for yields to decline further. Since speculators have been fighting this trend tooth and nail, there is still plenty of short covering fuel in t-note futures:

Potential target and resistance levels in 10 year t-note yields 

And lastly, a chart showing the TOPIX and the yen/dollar exchange rate. The former has lately lagged behind the latter, which in turn has reached a 23 year downtrend line. It seems likely that this will provide a bit more resistance than the shorter term trend line which the yen broke through last year has:

Dollar/yen and the TOPIX

Conclusion:

Regardless of whether these long term support/resistance levels break or hold, there should be some big moves in the offing either way.

Charts by: Bloomberg