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Chart Advisor: Tracking Energies’ All-Time Highs

Chart Advisor: Tracking Energies’ All-Time Highs

Posted March 20, 2024

By Manuel Tellechea, CMT

Investopedia is partnering with CMT Association on this newsletter.  The contents of this newsletter are for informational and educational purposes only, however, and do not constitute investing advice. The guest authors, which may sell research to investors, and may trade or hold positions in securities mentioned herein do not represent the views of CMT Association or Investopedia. Please consult a financial advisor for investment recommendations and services.

1/ Energies Reach New Highs

IEO ETF tracks a market cap weighted index of companies in the U.S. oil and gas exploration and production space according to Dow Jones. Also, it is a solid choice for representative exposure to the oil & gas exploration & production segment in the U.S.

The price is reaching a new all-time high as it breaks above the resistance of the ascending triangle.

This upward movement in price is primarily driven by the oil refiners, who have also reached a new all-time high.

2/ Japan Raises Rates

The Bank of Japan just raised interest rates for the first time in 17 years.

The short-term policy range in Japan is now +0.00% to +0.10% and more hikes may be on the horizon.

The 10-Year Japan Treasury Yield Index continues to climb, seeking higher levels. With domestic yields in Japan possibly increasing, will investors cease investing in foreign bonds? This could indeed mark a turning point, as Japan’s monetary policy from the crisis era may finally be nearing its end.
As Japanese investors’ interest in foreign assets diminishes and domestic opportunities improve, global bond yields may rise.

3/ Gasoline Keeps Rising

Gasoline futures prices continue to approach the mid-2022 resistance level.

If prices finally break above this level, inflationary pressure could increase further, after February’s CPI reading was also led by higher gasoline spending.

Gasoline prices tend to rise heading into spring as Americans get back on the road and summer driving season approaches.

4/ The Spread Widens

Treasury bond prices are influenced by inflation expectations, and commodity prices are considered an important indicator of inflation trends. As a result, commodities tend to move in the opposite direction to bond prices.

Therefore, commodities tend to trend in the same direction as interest rates.

If we look at the chart above, we see how commodities have been on the rise since the end of 2023, marking a turning point for bond prices, which saw a halt in the bull rally. The spread reopens between the two.

Inflationary pressures return.

Originally posted on March 20th 2024

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