By J.C. Parets & All Star Charts
Wednesday, 30th November, 2022
1/ SPY Reclaims its 200-day Moving Average
2/ An Economic Bellwether Coils
3/ The Uptrend Persists for Yields
4/ Dollar Weakness Broadens
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1/ SPY Reclaims its 200-day Moving Average
As the rally off the October lows extends, we’re focusing on several critical levels in the major indexes.
Among the levels we’re monitoring, the 200-day moving average (MA) for the S&P 500 is coming into play.
In August, this long-term average briefly acted as resistance before prices were rejected lower. Today, prices are reclaiming it for the first time since April.
This could be a logical level for overhead supply to enter in the short term, and a major development for the bulls if price can reclaim it.
2/ An Economic Bellwether Coils
Last week, Freeport-McMoRan (FCX) joined our list of stocks above the August highs. It completed a bearish-to-bullish reversal, breaching the upper bounds of its range.
Fast-forward to today, and price has been coiling within a tight consolidation just above the breakout level.
Typically, these continuation patterns tend to resolve in the direction of the underlying trend. When they don’t, it could be a sign that the trend is running out of fuel, and due for a reversal.
An upside resolution from this economic bellwether could suggest an improving risk appetite for commodity-linked stocks and cyclical value sectors. It could also bode well for the broad market and support the recent price action.
On the other hand, a downside resolution could see FCX fall back into its prior range. Such a scenario could signal strong risk-off sentiment.
3/ The Uptrend Persists for Yields
The dollar and yields have dominated the conversation among investors this year, as their impacts have been felt throughout the market.
In recent weeks however, the U.S. Dollar Index (DXY) has broken its year-to-date trendline, raising the question of whether interest rates could follow suit.
So far, they haven’t, as the uptrend remains intact for the five-year, 10–year, and 30-year Treasury yields.
If and when rates do begin to roll over, we’re monitoring the June pivot highs for confirmation. A break below these former highs could indicate a relief in selling pressure for long-duration assets, including bonds and growth stocks.
4/ Dollar Weakness Broadens
Data continues to arrive suggesting the U.S. dollar may have found a short-term top.
Earlier this week, the USD/CNY currency pair undercut its former 2020 highs, printing a potential failed breakout.
The risk may be to the downside as long as USD/CNY holds below its former highs. A sustained move lower for this forex (FX) pair would add to the growing list of emerging market currencies strengthening against the dollar.
It’s no longer just the six components of the U.S. Dollar Index driving the decline in the dollar, as participation broadens among major global currencies.
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Originally posted 30th November 2022
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