Chart Advisor: Swiss Market Strength

Articles From: Investopedia
Website: Investopedia

By J.C. Parets & All Star Charts

Monday, 24th April, 2023

1/ Swiss Market Strength

2/ High Beta Points Lower

3/ Commodity Currencies Fail to Confirm

4/ Platinum Breaks Out

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/ Swiss Market Strength

As participation continues to expand among European equities, our focus has been on identifying the strongest regions and indexes. Right now, they are mainly overseas.

One of our favorite exercises for finding the strongest international markets is by analyzing international indexes relative to a benchmark.

For example, here is the iShares MSCI Switzerland ETF (EWL) making new all-time highs relative to the All Country World Ex-US Index (ACWX):

Source: All Star Charts, with data provided by Optuma

After several years of rangebound action on a relative basis, Switzerland is resolving higher versus international equities. ACWX is an excellent index for global equities as it offers exposure to emerging and developed markets, as well as mid-cap stocks.

If these new highs stick in the EWL/ACWX ratio, we could anticipate further outperformance from Switzerland in the future. The new highs on an absolute basis would support an upside resolution on relative terms.

2/ High Beta Points Lower

One of our favorite metrics for gauging risk appetite is the High Beta (SPHB) vs. Low Volatility (SPLV) ratio.

When the ratio is trending higher, it is because investors are favoring riskier stocks over their alternatives. The overall market tends to move in the same direction as this ratio.

However, when the trend points lower, expressing defensive behavior, it’s usually taking place in a bearish environment.

Source: All Star Charts, with data provided by Optuma

As you can see in the chart above, SPHB/SPLV completed a double-bottom formation back in January. But in the few months since, the trend shifted back to the downside, peaking in February and retreating back to its old range.

As long as this ratio is beneath the breakout level, it would indicate a risk-off tone for the market.

3/ Commodity Currencies Fail to Confirm

Commodity currencies are among the many data points we’re monitoring for a confirmation of broad USD weakness. And like most global currencies, they chop sideways within a tight range.

Here’s a triple-pane chart of the Australian, Canadian, and New Zealand dollars:

Source: All Star Charts, with data provided by Optuma

All three trade near their July 2022 pivot lows to varying degrees. It’s the same indecisive price action we noted at the start of the year.

The New Zealand dollar stands as the only currency of the bunch holding above its respective lows from last summer. 

It would be hard to get behind a U.S. dollar downtrend with conviction until the above currencies reclaim their respective pivot lows and catch higher.

4/ Platinum Breaks Out

First palladium, now platinum?

It doesn’t matter whether you consider Platinum or Palladium true precious metals. The industrious side of the family is chipping in, supporting a new structural uptrend for the entire space. 

Platinum completed an inverted head and shoulders pattern last week while posting an overbought reading above 70 on the 14-day RSI.

Source: All Star Charts, with data provided by Optuma

The uptrends for gold and silver have cooled, but neither metal is under increased selling pressure. Instead, they’re digesting recent gains ahead of the Fed’s next meeting in May.

While the near-term environment might call for patience, it’s bullish to witness platinum break to fresh highs—palladium too—as the industrial side of the precious metal family could be expected to participate throughout a structural uptrend.

Originally posted 24th April 2023

Join the Discussion

Thank you for engaging with IBKR Campus. 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.

Your email address will not be published. Required fields are marked *

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: Futures Trading

Futures are not suitable for all investors. The amount you may lose may be greater than your initial investment. Before trading futures, please read the CFTC Risk Disclosure. A copy and additional information are available at ibkr.com.