By J.C. Parets & All Star Charts
Tuesday, 4th July, 2023
1/ July Is for the Bulls
2/ Fresh Relative Highs for Homebuilders
3/ Buyers Brace for a Breakout in USD/SGD
4/ GDX: Time to Buy the Dip?
Investopedia is partnering with All Star Charts on this newsletter, which both sells its research to investors, and may trade or hold positions in securities mentioned herein. The contents of this newsletter are for informational and educational purposes only, however, and do not constitute investing advice.
1/ July Is for the Bulls
With the year’s first half in the books, the equity markets delve into a historically slow period for stocks.
Surprisingly, according to historical seasonal trends, July’s average gain has been 1.26% since 1950, making it the fourth-best month of the year.
This implies that seasonality could continue to act as a tailwind, at least during the current month.
If you sell in May, you might want to come back and buy in July.
2/ Fresh Relative Highs for Homebuilders
When we dive beneath the surface looking for relative strength, home construction stocks stands out as an emerging leadership group.
These stocks are considered one of the most crucial groups in the U.S., as their performance reveals economic health and, more importantly, insight into the risk behavior of market participants.
Here’s the Home Construction ETF (ITB) reaching its highest level since 2007 relative to the S&P 500 (SPY):
As you can see above, it took roughly 15 years to break out of this monster rounding bottom formation and complete a structural trend reversal.
Seeing continued strength in the ITB/SPY ratio is a feather in the cap for bulls. And it supports the growing strength from the industrial sector and global equities outside the U.S.
3/ Buyers Brace for a Breakout in USD/SGD
First stop, Singapore! Steve Strazza and Sean McLaughlin are headed east on a whirlwind tour of Asia.
They’ll visit seven cities over the course of the next month, meeting traders and financial professionals from the tip of the Malay Peninsula all the way to Japan.
Some of us can’t physically travel with them, but we can live vicariously through their stories and videos, and, of course, our charts.
Check out the U.S. dollar/Singapore dollar pair:
It’s not a bad time for Strazza and McLaughlin to be in Singapore with greenbacks in their pockets.
Sure, USD/SGD remains well off its September 2022 highs. But it’s challenging the upper bounds of an eight-month range and could be poised to resolve higher.
If and when it does, we’ll be on high alert for broadening USD strength and potential headwinds for global risk assets.
4/ GDX: Time to Buy the Dip?
Precious metals and their related stocks remain a mess.
But could gold mining stocks be offering a potential buying opportunity after two months of relentless selling pressure?
It’s hard to say. Regardless, last week’s candle argues a bullish case for the Gold Miners ETF (GDX).
The long lower shadow or “umbrella line” immediately jumps out at us.
Long shadows often signal potential reversals following strong directional moves. This candle, in particular, is called a “hammer” as bulls hammer out a bottom.
So far, it’s only a potential bottom. We must witness upside follow-through in the coming weeks to confirm the bullish interpretation.
But last week’s action leaves us asking: Is it time to buy the dip in GDX?
—
Originally posted 4th July 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.
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.