By J.C. Parets & All Star Charts
1/ MSFT Hits New All-Time Highs
2/ Banks Break Out
3/ Commodities Have Gas in the Tank
4/ Bonds Just Got a Lot Cooler
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1/ MSFT Hits New All-Time Highs
The second largest company in the world by market capitalization is hitting new all-time highs.
Microsoft (MSFT) must have heard that Apple (AAPL) was a $3 trillion company and couldn’t stand it. Or stocks could simply be in a bull market.
From the looks of the big base breakout in MSFT, we’ll lean toward the latter:
We could see other areas of the market—especially the cap-weighted indexes—continue to catch higher if these fresh highs in MSFT hold.
It’s an extremely bullish data point, especially as evidence suggests broadening participation and potential small-cap leadership in the coming weeks and months.
The rising tide is lifting all boats—big and small.
2/ Banks Break Out
The big banks refuse to be left behind as upside participation expands.
After tracing a textbook inverted head and shoulders pattern for the past four months, the SPDR Bank ETF (KBE) is piercing through the upper bounds of the range, reaching its highest level since March.
These formations act as reversal patterns once the neckline is breached, indicating that the path of least resistance now points higher for these stocks.
The fact that even the worst-performing stocks are resolving higher from bullish reversal formations speaks to risk-seeking behavior and reinforces expanding breadth at an industry group level.
As long as KBE holds above $38.50, it signals a significant shift in the trend direction for financials while supporting the overall health of the bull market.
3/ Commodities Have Gas in the Tank
Commodities have been overshadowed by stocks this year as equities have kicked off a new bull market.
Of course, the rallies in sugar, cocoa, and more recently wheat (up more than 50 cents during today’s session) and other grains have captured traders’ attention.
But procyclical groups, especially energy, might be due for a rally.
This chart shows gasoline futures carving out a potential multi-year base:
The path of least resistance points higher if demand absorbs supply at the shelf of former highs.
If buyers drive a decisive breakout, the energy complex and commodities in general could join cyclical stocks on a fresh bull run through the second half of the year.
4/ Bonds Just Got a Lot Cooler
Bonds are breaking out! Yes … Bonds!
No, not U.S. Treasuries. We’re referring to corporate bonds. Check out the Convertible Bond ETF (CWB):
CWB is tracing a classic bullish reversal in price and momentum, confirming the upside resolution.
But the breakout in CWB represents a bullish data point for equities, not bonds.
The only bonds breaking out are the ones that one day, with a little luck, could become a stock. If you have an itch to buy bonds, it could be worthwhile to skip the hassle and go straight to the stock market.
Microsoft is printing new all-time highs, while the Dow Jones Industrial Average (DJIA) is posting fresh 52-week highs.
This suggests that it could be a great environment for stock investors. And those are only two data points from myriad supporting bullish evidence.
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Originally posted 19th July 2023
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