By Shane Murphy, CMT

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Invert!

A quick and easy way to reduce technical bias is to invert the asset’s price chart. This simple rule of thumb has helped me out tremendously over the years. If I invert the Y-axis of the chart and the analysis brings me to the same directional conclusion – then technical evidence is lacking, and we cannot justify a high degree of directional conviction. For example, let’s look at the US Dollar Index (DXY) on an inverted scale. Would you buy or sell this asset? Most of you would say buy (I hope) as the asset is consolidating atop well-defined support. A classic bullish pattern. If your original view was also bullish – it’s time to head back to the drawing board!

If disciplined in your technical work – 9 times out of 10 the directional views will match up correctly. But the exercise is still one I practice often, especially when it comes to assets with broad market implications.

Damage in Large vs. Small

The Magnificent 7 took a pause in Q4 and handed over leadership the remaining 493. Whether you’re expressing this trade via Smallcaps or equal-weight large-caps, the trade is essentially the same. Everything but the Mag 7. The chart below displays the price ratio of the Mag 7 versus Smallcaps. The blue line represents the volume weighted average price (VWAP), anchored to the April 2025 tariff tantrum lows. This level coincided with technical support throughout the second half of last year.

The chart does a good job highlighting the technical damage realized in early January. The ratio is trading well below the anchored VWAP, which means the average investor who went overweight Mag7 since the Tariff tantrum – is likely regretting the decision. Until the ratio can reclaim this level, it’s safe to hold a bearish view on the chart.

Still Waiting on Rates

Arguably the most important chart in the world – the US 10yr Treasury Note Yield. For the last 2-years, the chart has coiled and refuses to make a decisive move in any direction.

I’m not in the business of forecasting interest rates – but what I do know is that historically, coiling patterns resolve with a bang. Directionally, it’s a coin flip, but the velocity of the move is always significant. We should see a resolution in yields over the next 6-12 months – can’t wait to watch this one play out!

Shane Murphy, CMT has been a CMT Charterholder since 2022. He is currently a Wealth Management Associate at Michael Roberts Associates, Inc. where he assists in portfolio construction, investment research, and financial planning. Learn more at www.mraplanners.com or check Shane out on twitter @murphycharts.

Shared content and posted charts are intended to be used for informational and educational purposes only. CMT Association does not offer, and this information shall not be understood or construed as, financial advice or investment recommendations. The information provided is not a substitute for advice from an investment professional. CMT Association does not accept liability for any financial loss or damage our audience may incur.