By J.C. Parets & All Star Charts
1/ The Bear Trap in Apple
2/ No Confirmation for Rates
3/ Silver Provides a Glimmer of Hope
4/ Dollar Down? Consider the Pound!
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1/ The Bear Trap in Apple
Tech stocks are roaring higher in the after-hours session, fueled by another historic earnings report from the artificial intelligence (AI) industry gatekeeper Nvidia (NVDA).
When it comes to the mega-cap growth complex, the recent corrective action in Apple (AAPL) was as severe as any other stock. This is illustrated by the first oversold momentum reading since last year, shown in the lower pane below:
Since finding a near-term low Friday, Apple has rallied roughly 4%. More importantly, this has set the stock up for a crucial retest of the breakout level at its old highs, just north of $180.
A broad-based tech stock rally could be just what Apple bulls need to spark a bear trap and potential swift move higher from here. If we’re above the old highs, the risk is to the upside for the world’s largest company.
2/ No Confirmation for Rates
A growing list of government bond yields from the U.S. and Europe have made new decade-long highs since last week. However, the technicals have us questioning whether these range breakouts are sustainable.
The chart below shows the U.S. 10-year yield struggling to resolve higher from a 10-month consolidation. The 2022 highs around 4.30% are the line in the sand:
When we see a textbook pattern resolution like this, we always look for confirmation to determine our level of confidence in the price action. One of our favorite tools for this is momentum, measured by the 14-day relative strength index (RSI).
If we see new highs and breakouts supported by overbought momentum readings, this tells us there is strong demand or upward pressure for the asset. Seeing as the U.S. 10-year has been unable to achieve overbought conditions since March, there is a high likelihood of yields failing and rolling over at these key resistance levels.
3/ Silver Provides a Glimmer of Hope
Precious metals are on breakdown alert on absolute and relative terms.
Yesterday, we highlighted the gold mining stocks (GDX) versus the broader market (SPY) as sellers continue to challenge a critical support level for gold.
While the situation grows dire for gold bugs, silver is giving precious metals bulls something to talk about.
Silver futures are digging in against a year-long uptrend line as momentum fails to register oversold readings.
These data points suggest that the uptrend remains intact as bears can’t manage to take control of the market.
Gold and precious metals have their work cut out for them. But if there was ever a place for gold bugs to hang their hopes—it’s on silver.
4/ Dollar Down? Consider the Pound!
The U.S. dollar sits atop the heap.
While the evidence suggests that we lean toward a strengthening dollar, we always prepare to take the other side of a trade if and when the data changes.
Luckily, the British pound (GBP/USD) is providing a clear level to trade against:
It doesn’t hurt that the British pound trends within a bullish momentum regime, bouncing off the lower bounds of its year-to-date range on the 14-day RSI.
The last two times momentum bounced off these levels coincided with excellent buying opportunities.
Will a third bounce mark another solid buy? Perhaps.
But all we can do as traders and analysts is weigh the evidence and define the risk. The rest is out of our hands.
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Originally posted 23d August 2023
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