Chart Advisor: Running on Empty

Articles From: Investopedia
Website: Investopedia

By J.C. Parets & All Star Charts

Monday, 30th January, 2023

1/ Is Energy Out of Gas?

2/ A Big Trend Change for Small Stocks

3/ Gold Rebounds in Pounds

4/ Crypto Internals Suggest Further Upside

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/ Is Energy Out of Gas?

The energy sector (XLE) led markets lower today, with the sector falling over 2% as broad selling pressure gripped equity markets.

Sellers arrived exactly where they did back in June and November of last year, rejecting the recent advance at the 93.50 level and preventing bulls from taking control.

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Source: All Star Charts, with data provided by Optuma

Notice that although the bullish momentum regime (as measured by the 14-period RSI) remains in place, momentum has been waning of late, failing to hit overbought conditions during the recent rally.

Seeing price fail for the third time at such a critical level suggests buyers may need time to absorb the overhead supply before we can get a decisive upside resolution. We could expect a choppy market in the coming days and weeks as price reacts to this resistance zone.

2/ A Big Trend Change for Small Stocks

Value and cyclical stocks continue to be in control as the trend becomes increasingly pronounced in their favor.

This is especially true when we look at the Small-Cap Value ETF (IJS) versus the S&P Small-Cap 600 ETF (IJR) ratio, which has been trending steadily higher since it bottomed out in 2021.

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Source: All Star Charts, with data provided by Optuma

The relationship is currently resolving higher from a multi-year bearish-to-bullish reversal and reaching its highest level since 2018.

If this breakout proves to be a valid one, value-oriented sectors could continue to benefit at the expense of growth stocks.

3/ Gold Rebounds in Pounds

One way to analyze gold from an intermarket perspective is to examine its performance priced in various world currencies.

In the chart below, we’re looking at gold futures pushing toward all-time highs priced in British pound sterling (GBP).

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Source: All Star Charts, with data provided by Optuma

The pound has been one of the strongest currencies in the developed world in recent months, as GBP flirts with fresh seven-month highs. As such, we’re viewing this potential breakout pattern as a very bullish development for gold. As gold breaks out in a growing list of world currencies, it could only be a matter of time before we see new highs in dollar terms.

4/ Crypto Internals Suggest Further Upside

Last week, we discussed the improving market internals for cryptocurrencies as we saw an extreme reading in the number of coins hitting overbought conditions during the recent rally. In fact, our indicator achieved a level we would typically categorize as a bullish breadth thrust.

Bullish breadth thrusts tend to occur during the early stages of a new bull market. When these readings are valid, they almost always occur in clusters.

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Source: All Star Charts, with data provided by Optuma

As such, the best way we can assure this indicates a new bull cycle for crypto is by seeing more thrusts occur in the near future. And we’re already seeing it.

The chart above shows the number of coins that are above their long-term moving average in our universe of over 300 of the largest tokens. Today’s reading is only comparable to that experienced at the height of the crypto bull market in late 2021.

This is yet another piece of evidence that suggests Bitcoin and related coins could be embarking on a new mark-up phase.

Originally posted 30th January, 2023

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