Chart Advisor: Rising Rates Persist – Long-duration assets slide as European yields rip higher.

Articles From: Investopedia
Website: Investopedia

By J.C. Parets & All Star Charts

Tuesday, 27th December, 2022

1/ New Highs for Interest Rates Overseas

2/ Bond Breakouts Fail

3/ Bears Drive Tesla Shares Lower

4/ New Relative Lows for Growth

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1/ New Highs for Interest Rates Overseas

The rising rate environment remains intact. And this is not only the case here in the U.S., as sovereign bond yields are hitting new highs in several countries with developed economies.

Today, the benchmark rates of Germany, France, Spain, and Portugal posted fresh multi-year highs. These are undeniable uptrends.

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Source: All Star Charts, with data provided by TradingView

Since rising rates have been a global phenomenon for a few years now, we can look to European bond markets for confirmation or leading evidence for U.S. Treasurys. So far, the relentless rally across the pond suggests higher rates stateside. As long as this relationship holds, we could expect U.S. yields to catch higher in the coming weeks. 

2/ Bond Breakouts Fail

With rates ripping around the globe, it’s no surprise to see bonds failing to hold their recent highs. It’s been the same story all year—rates rise as bonds and stocks fall.

And with the 30-year, 10-year, five-year, and two-year Treasury futures undercutting their October pivot highs, not much has changed. These failed breakouts are a reminder that the downtrend persists for U.S. Treasurys across the curve.

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Source: All Star Charts, with data provided by Optuma

Now, the question is whether we’ll witness a fast move in the opposite direction.

Regardless, we might not want to fight this trend. If anything, we may want to stay alert for increased selling pressure spilling over into long-duration equities. 

3/ Bears Drive Tesla Shares Lower

Tesla (TSLA) shares have been under relentless pressure in the past few weeks, tumbling steadily lower ever since completing a massive topping formation earlier in the month. Shares have been lower in ten of the last eleven sessions, plunging over 35% in just about two weeks time.

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Source: All Star Charts, with data provided by Optuma

The damage has been stunning as Tesla’s stock price has given back nearly three-quarters of its value since registering all-time highs back in November 2021. TSLA lost over $850 billion in market capitalization over this time, from $1.2 trillion at its peak to under $350 billion today. 

Momentum, as measured by the 14-day RSI, is at its lowest level in history. This kind of extreme oversold reading is not something typically seen in bull markets. There might be tough times ahead for TSLA shareholders yet. 

4/ New Relative Lows for Growth

Since the ratio peaked last November, the relationship between growth and value has leaned heavily in favor of cyclical value stocks.

Despite a brief period of leadership for growth earlier this year, we’ve seen the trend reassert itself and accelerate in favor of value in recent weeks.

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Source: All Star Charts, with data provided by Optuma

And there is no evidence to suggest that growth stocks are ready to turn it around on either absolute or relative terms. 

Originally posted 27th December 2022

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