1/ Natural Gas Spotlight
2/ Defensives Underperforming
3/ Financials Benefit from Steepening Yield Curve
4/ Boring Bitcoin
Investopedia is partnering with CMT Association on this newsletter. The contents of this newsletter are for informational and educational purposes only, however, and do not constitute investing advice. The guest authors, which may sell research to investors, and may trade or hold positions in securities mentioned herein do not represent the views of CMT Association or Investopedia. Please consult a financial advisor for investment recommendations and services.
1/ Natural Gas Spotlight
Energy commodities are starting Q4 on a bearish note. That is, except for Natural Gas. Natural Gas prices moved higher last week, breaking out from a multi-month basing pattern. Picture perfect price action for change of trend style investors.
Natural Gas closed above the 200-day moving average for the 2nd week in a row. October-Nov is a seasonally strong period for Natural Gas, we’ll see if this holds true for 2023.
2/ Defensives Underperforming
Defensive stocks are underperforming the broad market. This is normally the case during healthy periods of investor risk appetite. Utilities and Consumer Staples are the purest underperformers while Healthcare has held up relatively well given the diversity of the sector.
The price ratio is above the Feb 2023 highs and confirming the action we’ve seen from the total US stock market. Given the high positive correlation, a divergence between this ratio and the market would be very notable.
3/ Financials Benefit from Steepening Yield Curve
When long yields rise faster than short yields, the spread between the two increases. This is referred to as a bear steepener. One beneficiary of a steepening yield curve is US banks. A steep yield curve improves the spread between what is borrowed (short-term deposits) and earned (long-term lending).
It’s important to note, a bear steepener typically punishes stocks in the short-term and just because equal-weight Financials are outperforming on a relative basis, doesn’t mean they are necessarily improving on an absolute basis.
4/ Boring Bitcoin
When an asset is struggling to find trend, it is best to stay away and focus on other opportunities. Crypto is a good example of an asset struggling to find its footing and establish trend.
Bitcoin has been range-bound for the better part of a year. The 30,000 level is a great example of the principle of polarity, where prior support will become new resistance. A breakout above 30,000 is what many trend followers are waiting for.
—
Originally posted 9th October 2023
Disclosure: Investopedia
Investopedia.com: The comments, opinions and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or to adopt any investment strategy. While we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described on our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment or strategy. This information is intended for US residents only.
Disclosure: Interactive Brokers
Information posted on IBKR Campus that is provided by third-parties does NOT constitute a recommendation that you should contract for the services of that third party. Third-party participants who contribute to IBKR Campus are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.
This material is from Investopedia and is being posted with its permission. The views expressed in this material are solely those of the author and/or Investopedia and Interactive Brokers is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to buy or sell any security. It should not be construed as research or investment advice or a recommendation to buy, sell or hold any security or commodity. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
Disclosure: ETFs
Any discussion or mention of an ETF is not to be construed as recommendation, promotion or solicitation. All investors should review and consider associated investment risks, charges and expenses of the investment company or fund prior to investing. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
Disclosure: Forex
There is a substantial risk of loss in foreign exchange trading. The settlement date of foreign exchange trades can vary due to time zone differences and bank holidays. When trading across foreign exchange markets, this may necessitate borrowing funds to settle foreign exchange trades. The interest rate on borrowed funds must be considered when computing the cost of trades across multiple markets.
Disclosure: Bitcoin Futures
TRADING IN BITCOIN FUTURES IS ESPECIALLY RISKY AND IS ONLY FOR CLIENTS WITH A HIGH RISK TOLERANCE AND THE FINANCIAL ABILITY TO SUSTAIN LOSSES. More information about the risk of trading Bitcoin products can be found on the IBKR website. If you're new to bitcoin, or futures in general, see Introduction to Bitcoin Futures.
Join The Conversation
If you have a general question, it may already be covered in our FAQs. If you have an account-specific question or concern, please reach out to Client Services.