Chart Advisor: Yields Retest Prior-Cycle Peak

Articles From: Investopedia
Website: Investopedia

By J.C. Parets & All Star Charts

Thursday, 6th April, 2023

1/ Yields Retest Prior-Cycle Peak

2/ Aerospace & Defense Could Be Ready to Take Off

3/ Ethereum Reclaims a Key Level

4/ Smart Money Buys Palladium

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1/ Yields Retest Prior-Cycle Peak

The 10-year Treasury yield posted fresh six-month lows yesterday. 

Like many risk assets over the past year, it’s retesting its former 2018 highs. Those former highs near 3.25% mark the peak of the previous cycle.

Source: All Star Charts, with data provided by Optuma

This would be a logical level for the decline in yields to pause.

On the other hand, a print below 3.25% could signal a bearish trend reversal. If and when that happens, long-duration assets such as bonds, growth stocks, and precious metals could stand to benefit.

2/ Aerospace & Defense Could Be Ready to Take Off

Although technology stocks have been in the spotlight this year, there are pockets of strength within cyclical sectors that we can’t ignore. Aerospace and defense provides an excellent example as it continues to stand out.

The resilience of the Dow Jones U.S. Aerospace & Defense Index has been impressive:

Source: All Star Charts, with data provided by Optuma

As you can see, the index is coiling in a tight range as it presses against the upper bounds of a multi-year base.

If and when the bulls absorb overhead supply, we could expect these stocks to break out and trend higher.

3/ Ethereum Reclaims a Key Level

When it comes to crypto markets, the recent rally off the lows has brought Ethereum (ETH) back above a critical polarity zone. A shelf of former lows from 2021 has acted as resistance for the past eight months. 

But price is now back above this critical level, printing fresh year-to-date highs.

Source: All Star Charts, with data provided by Optuma

If Ethereum can hold above its 2021 lows, the damage from this massive topping pattern could be fully repaired as the regime changes in favor of the bulls.

It could also favor a bullish outlook for cryptocurrencies in the coming months and quarters.

4/ Smart Money Buys Palladium

Crude oil and gold have recorded strong upside moves this week. But there’s another commodity that could be setting itself up for a rally: palladium.

Commercial hedgers are holding their largest net long position in history:

Source: All Star Charts, with data provided by Optuma

Commercial hedgers represent the strongest hands with the largest positions. You can think of them as “smart money.” And the smart money is accumulating palladium like never before.

Notice the sustained trends following similar commercial positions in 2012, 2016, and 2018. The conditions are present for the next leg higher in palladium, and from the looks of it, it could be explosive.

Originally posted 6th April 2023, 2023

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