By J.C. Parets & All Star Charts
Friday, 9th June, 2023
1/ New Highs for ARKF
2/ Emerging Markets Break Higher
3/ The Right Read on Real Estate
4/ Commodities Find Support
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1/ New Highs for ARKF
With tech stocks in the driver’s seat, it was only a matter of time before the most speculative growth areas started to participate.
Today, the Ark Fintech Innovation ETF (ARKF) made its highest weekly closing high since August last year:
As you can see, ARKF is on the verge of completing a bearish-to-bullish reversal pattern. If and when it does, it will be a major feather in the hat for stock market bulls.
The fact that the most speculative areas of the market are making new highs speaks to risk-seeking behavior and supports a bullish outlook for risk assets.
2/ Emerging Markets Break Higher
When it comes to international equities, we like to see things with China removed from the equation so that the country isn’t such a dominant weighting, making the indexes more diversified.
The Emerging Markets Ex-China ETF (EMXC) is the perfect vehicle that illustrates this theme.
Here’s EMXC reaching new 52-week highs this week:
After over a year of building a rounding bottom formation, price sliced through resistance. If momentum achieves overbought readings, this would confirm the recent breakout.
If EMXC holds this move, we could see a structural trend reversal and other global indexes participating to the upside.
3/ The Right Read on Real Estate
Homebuilders have been some of the strongest stocks since last year. However, we can’t say the same for all equities with exposure to real estate. In fact, real estate has been the worst sector by many measures over the same time frame. The chart below shows the opposing paths that these two groups of stocks are taking:
While Homebuilders (ITB) are pressing to new highs relative to the broader market, the relative trend for Large-Cap Real Estate (XLRE) recently made new all-time lows.
One of these groups has been trending steadily higher on both absolute and relative terms. The other has been falling steadily. This begs the question as to which group is providing the right read when it comes to the health of the broader real estate and housing market.
4/ Commodities Find Support
A risk-on tone is spreading across the market, and it’s not only tech and growth names enjoying a bid.
While commodities are caught in correction mode, we must remember that price doesn’t travel in a straight line.
Check out rebar futures posting a potential failed breakdown:
The bounce in rebar fits with the strength we’re witnessing from small caps and emerging market equities.
Yes, copper has undercut former support. And crude oil is trading below its former cycle peak.
But if industrial metals such as rebar start catching higher, procyclical commodities and their related stocks will likely follow suit.
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Originally posted 9th June 2023
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