CLICK ON CHART TO ENLARGE
The “Power of the Pattern” suggested last week that Basic Materials ETF (IYM) was on Right shoulder support and that a quick 10% rally could take place. (see post here)
Last summer IYM looks to have created a “Bullish Head & Shoulders” pattern and once it cleared flag/pennant resistance line (1) a quality breakout rally (30%+ gain in a few months) took place. IYM looks to be creating a similar pattern and is now testing the flag/pennant resistance, similar to last summers pattern. Basic Materials/IYM continues to be a key Macro ETF to watch. An upside breakout in IYM should be very good for this ETF and a good sign for the broad market, as it was on the breakout last fall.
Yogesh…A break above resistance in the CRX index would be helpful to the worlds markets. Per GE2, a breakout would lower the odds of it happening, which is great! A new bull cycle starting? Can’t confirm that one yet!
Thanks for your great questions and viewership,
Shanghai (China) remains on a crossroad of support, while IYM is reflecting some relative strength compared to the 500 the past week.
Something of note…Banks and IYM are reflecting some relative strenght the past few days….a few days does not make a trend, yet this is positive action. See new KRE post on the blog, which reflects another attempt to break above falling resistance. As I shared on the blog, I would want to follow KRE should it breakout.
P.S. Thanks for the kind words and viewership Adam!
If the breakout takes place, you mentioned it would be good for the broad markets (equities). Does that mean the Great Escape 2 will not take place or atleast the probability of GE2 is less now if the new bull cycle has started.
also, the volume the past 2 months is pathetic: why is that?
the difference is that the last time there was not so much overhead resistance: it was clear sailing
There is a slight difference this time round however.
With commodity assets, I find the 400 daily ema to be quite useful. In mid 2010, we remained above it when the inverse H&S pattern was unfolding. Today, we’ve been trading solidly below since august with several retest since. The retests has allowed the 200 daily ema to keep falling & is now crossing the 400. The last time this occurred, to the downside, was on sept/october ’08.
I do see more upside in short term, possibly to 70. but mid to late dec or early january I think we will see a renewed downside move (possibly across all market assets.) Several weekly close above 69 will probably alter the structure.
Is it not concerning that the SSE isn’t confirming all this wonderful market movement? Certainly seems like it is holding long term support on the weekly chart but goodness it is getting close.
Hey Chris, love your blog.
What do you make of the divergence between materials and China, which is a hair’s breadth away from an important breakdown as of yesterday’s close? Just checking as I know you watch this too.