By J.C. Parets & All Star Charts
Monday, 10th October, 2022
1/ New Multi-Year Lows for TLT and ARKK
2/ Industrials Are Island Hopping
3/ Global Yields Keep Soaring
4/ Junior Is on His Feet
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/ New Multi-Year Lows for TLT and ARKK
The bond market was closed for a federal holiday in the U.S., but that didn’t stop the iShares 20+ Year Treasury Bond ETF (TLT) from printing a fresh low. It fell below $100 for the first time since 2011.
Falling bond prices (rising yields) have put pressure on growth stocks and other long-duration assets all year. The ARK Innovation ETF (ARKK) is a perfect example of that relationship. TLT broke its June lows a few weeks ago, and ARKK followed today, closing below its June lows. Seeing new multi-year lows from both of these ETFs is confirmation that these trends could likely continue in the intermediate term.
2/ Industrials Are Island Hopping
This is a close look at the trailing month and a half of price action in the Sector SPDR Industrials ETF (XLI). Industrials have the tightest historic correlation to the major averages in the U.S., so the index is a great tool for confirming the price action of the overall equity market.
And that is exactly what it is doing as industrials just printed a failed reversal pattern, making for an excellent illustration of the choppy and trendless environment we’re in.
Early in the month, XLI launched higher from an island reversal formation. However, there was absolutely no follow-through and the move stalled. Friday, prices gapped right back into their old range, forming yet another island reversal.
With XLI currently sitting around its summer lows, we’re watching the pivot lows around 82.75. If those are taken out, we could be ready for a fresh leg to the downside. And if that’s the case, the major averages might follow. The current setup in the Dow Industrial Average looks almost identical to XLI.
3/ Global Yields Keep Soaring
Rising rates have been a worldwide phenomenon for the last two years as yields have rallied around the globe.
When we look at European benchmark rates, the 10-year yields of Germany, France, and Spain have posted successful retests of their respective June pivot highs.
Seeing these former resistance zones successfully turn into support confirms the uptrend in global yields and highlights the resilience of the rising rate environment.
As long as these trends remain intact overseas, we could expect rates to continue moving higher in the U.S. With a handful of benchmark rates around the world taking out their September pivot highs today, the U.S. 10-year might do the same in the coming days.
4/ Junior Is on His Feet
The precious metals space finally begins to show signs of life after barely moving during the past two years.
Last week, the Junior Gold Miners ETF (GDXJ) printed its largest five-day rate of change since the spring of 2020. Momentum thrusts like this tend to occur in the early stages of sustained rallies.
But like breadth thrusts, meaningful upside momentum readings tend to occur in clusters, and require confirmation. Notice the cluster supporting the rally off the April 2020 lows.
Precious metals bulls want to see more explosive upside action, confirming last week’s pop. If and when they get it, gold and silver miners could offer a great opportunity on the long side.
—
Originally posted 10th October, 2022
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.
