Back in late October, we talked about some interesting inflection points for the U.S. Dollar Index (USD) and the iShares MSCI Emerging Markets ETF (EEM). While that call was early, we are starting to see some of the fruits of our labor. The greenback and emerging markets are joined at the hip in an inverse way, so an analysis of one is not complete without an analysis of the other.
Since early 2018, USD has been in an uptrend, while EEM has been in a downtrend. The slope of the USD’s rising channel since August ‘18 has been shallow and is just breaking this uptrend near $97. At the same time, EEM has broken its downtrend since April and is making minor new recovery highs above that April peak. Simply, the USD is breaking down while EEM is breaking its eight-month downtrend. EEM completed an inverse head-and-shoulders and could see a measured move back toward its early ‘18 all-time-high of $49.53. Since May, EEM has stabilized versus the S&P 500, and is outperforming the index since late November. Because of the massive move EEM had coming out of the financial crisis, when the ETF almost tripled, performance since October 2010 has lagged the “500.”
Looking at the Commitment of Trader’s (COT) data, we see commercial hedgers (smart money) have a neutral position in dollar futures. Hedgers in euro futures have a moderately large position. The euro makes up 58% of the USD, so it is critical to any dollar analysis. Data adjusted for open interest shows hedgers have a small net dollar position, while speculators have a large position. Overall, the COT data is dollar bearish.
Uber Technologies (UBER)
Uber operates global networks for ride-sharing, carpooling, food delivery, and other services. The company’s smartphone app enables consumers to contact drivers, arrange a meeting point, and get to their destination in a cash-free transaction. Uber has operations in more than 700 cities on six continents, resulting in over 18 million trips daily.
UBER, which has been in a nasty decline since hitting $47 in June, is showing signs of price stabilization. It’s possible the shares hit a panic low in early November, as the stock, like many IPO’s this year, was battered down to $25.58. It has completed a small ABC bottom, and, on Monday, broke back above its 50-day average on strong volume. There is little technical resistance immediately overhead, with the first piece at the late-October high of $33.90 and the second at $35. Above that, there is very little until the low $40’s.
We would put a stop-loss just below chart support at $27.60. We would take profits in the mid-$30’s area.
Baker Hughes (BKR)
Baker Hughes, formed by the merger of Baker Hughes and GE's oil and gas business in July 2017, is the world's third-largest oil services company, with annual pro-forma revenues of $23 billion and approximately 70,000 employees. It expects to generate approximately 30% of revenue from the U.S. and 70% from international markets.
BKR is showing signs of bottoming after a horrendous decline that started in late 2016 near $48. The worst may have ended in August down near $20. Since December 2018, the shares have tested the $20 region on multiple occasions and held. Late last week, BKR recaptured its 200-day average and is testing overhead supply once again in the $24/$26 region. If the stock can break through this zone of resistance, it could see a measured move up to the low $30’s. The most-recent rally (since early December) has been accompanied by above average volume, a sign of institutional accumulation.
We would put a stop-loss just below chart support at $22. We would take profits in the $30 region if the near-term block at $25 fails to hold the shares back.
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