By J.C. Parets & All Star Charts
Thursday, 1st December, 2022
1/ International Equities Turn Higher
2/ It’s a Merry Time of Year for Stocks
3/ Insight on Interest Rates
4/ Hi Ho Silver
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1/ International Equities Turn Higher
Improvement from international equities has been a theme playing out in the equity market for months now. Recently, we witnessed India’s benchmark index, the Nifty 50, print fresh all-time highs while broader indexes reclaimed critical levels.
Another index we’ve been monitoring is the iShares MSCI EAFE Index (EFA). Today, it broke back above its August pivot high, posting its first higher high in over a year.
This is how uptrends usually begin. Trendline violations, higher highs, and overbought momentum readings could all indicate a trend reversal is underway.
This type of price action isn’t limited to the EAFE Index. We’re noticing similar strength worldwide at the country level, particularly in Europe. This indicates broadening participation from international stocks, and could foreshadow a fresh leg higher for global equities.
2/ It’s a Merry Time of Year for Stocks
With November behind us, we are entering the final month of the year, which has historically been a favorable period for the stock market.
The average performance of the S&P 500 for each trading day in December over the past 71 years is shown below:
Although December is historically a positive month for equities, most of the gains have typically occurred near the end of the month, starting on December 23, in what is referred to as a “Santa Claus rally.”
We could experience a similar rally this year. As a result, it could come as no surprise if the market finishes the year on a high note.
3/ The Dollar Slides Below its 200-day Moving Average
The U.S. Dollar Index (DXY) hit a peak in late September and has been rolling over since.
Today, DXY closed below its 200-day moving average (MA) for the first time since June 2021, ending the longest such streak above its long-term moving average to date.
With prices below their 200-day MA, this could be the final indicator suggesting an end to the dollar rally. As long as this remains the case, risk assets, particularly stocks, could receive a much-needed boost.
4/ Hi Ho Silver
Precious metals could enjoy a weaker dollar environment more than most other asset classes. It showed in today’s price action.
Silver futures pierced through the breakout level of a six-month reversal pattern, gaining over 5% for the day.
The path of least resistance could now be higher for the high-beta plays within the precious metals space. This indicates a burgeoning risk appetite for silver and precious metals as a whole.
Whether we look at gold futures or gold mining stocks (GDX), silver holding above its June pivot highs is a critical element of any bullish thesis.
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Originally posted 1st December 2022
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