By J.C. Parets & All Star Charts
Monday, 14th November, 2022
1/ Bottoms Are a Process
2/ Value Takes the Lead
3/ CAT is Closing In
4/ Platinum Joins the Party
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1/ Bottoms Are a Process
Despite the persistent choppy conditions at the index level, breadth is expanding beneath the surface. This is illustrated by the fact that more than half of S&P 500 component stocks have moved back above their long-term, 40-week moving average.
Put simply, the majority of stocks within the U.S. large-cap benchmark are now in an uptrend.
Notice that this reading has surpassed its August peak, despite the index itself remaining well below its June highs.
We could expect price action to remain choppy in the short-to-intermediate term. Bottoms are a process, not an event. As such, they take time to develop. However, the recent expansion in participation is solid evidence that we could be headed in the right direction.
2/ Value Takes the Lead
With the market enjoying a healthy rally off the October lows, leadership from value sectors continues to spread beyond just energy stocks. The chart below depicts the relative trends in industrials, financials, and materials, all of which have accelerated higher in recent weeks.
With a growing number of these sectors completing structural trend reversals relative to the broader market, the evidence clearly favors value and cyclical stocks.
Investors may want to be overweight these sectors, and underweight growth stocks over the intermediate and long term.
3/ CAT is Closing In
When it comes to individual stocks, Caterpillar (CAT) serves as a bellwether for the global economy and gives us as valuable information regarding risk appetite.
We like to view this industrial bellwether as an index in its own right. Today, the stock closed less than 4% below its all-time highs.
With CAT performing as well as it is, we could be optimistic about the health of the global economy.
If and when CAT reaches new highs, it could represent a very bullish development for the broader market and risk assets in general.
4/ Platinum Joins the Party
No matter where we look, metals are rising to the surface.
Last week, platinum broke through a confluence of resistance, marked by the upper bounds of a multi-year trading channel and a key polarity zone stretching back to 2017.
This is a significant level for platinum futures. If the bulls manage to stay in control and hold prices above the shelf of former highs, a retest of the January 2021 high could be likely.
Broad participation from the metals space, including for contracts such as platinum, signals a growing risk appetite for what has been the worst-performing area of the commodity space year-to-date.
The future could be bright for metals and commodities in general.
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Originally posted 14th November, 2022
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