Glasnost & Perestroika
The Quotedian - Vol V, Issue 117
If not me, who? And if not now, when?
— Mikhail Gorbachev
No worries, despite today’s title this will not be a political issue of The Quotedian (though being direct collateral damage of the ongoing geopolitical situation would give me all the right to a good old rant), but rather just a brief homage to the man who ended decades of the cold war between East and West. Of course, as you have heard already, Mikhail Gorbachev, the last leader of the Soviet Union, died last night at the age of 91. RIP Mikhail.
To the markets … Despite stocks opening up positively in Europe and the US, and holding up during most of the session in the case of the former, gains quickly turned into losses about half an hour into the US session as too good economic data once again made investors aware that a dovish Fed pivot is moving further into the future. Hence, stocks closed down for a third consecutive day, with the S&P 500 having truncated the 50-day moving average I highlighted yesterday as possible support and leaving a pretty bearish picture for now. The following graph is a daily chart of the S&P 500 mini-futures index, which includes today’s half a percentage point advance (last green candle), which still leaves the index BELOW that 50-day MA (blue):
Zooming out a bit, the following longer-term chart on the S&P 500 is an interesting way to look at our trademark “lines in the sand”:
Let’s call it an inverse traffic light, where we are currently trading in the neutral, sit-and-wait yellow zone, with a break on either side being pretty self-explanatory.
Back (briefly) to yesterday’s session … for a third day, the sell-off was broad, with only one-eighth of the S&P 500 constituents advancing on the day. All eleven economic sectors ended lower, with the largest blow by far going to energy stocks:
Despite the size of the (down)move in Energy stocks on the day, this does of course not endanger the bullish trend on any timeframe for now:
This early Wednesday, Asian markets are very mixed, with markets in Japan and Australia a tad lower, whilst Chinese, Taiwan and Korean stocks for example are up on the day. A big, two and a half percent up day in India deserve a special mention and this rather bullish chart:
Rather interesting longer-term resistance line (black dashed) there too!
We will largely skip the fixed income section due to time constraints today, but I will leave you with the following longer-term chart (which has COTD potential), comparing 10-year Government bond yields in China (green) to those in the US (Blue). Quite the divergence there now:
In FX markets, the EUR/USD cross-rate continues to trade around the parity level, with the chart getting murkier by the day:
Though overall it does feel like just another consolidation period during the prevailing downtrend.
Ok, commodities in general and oil in particular. Price of crude saw a steep drop yesterday (e.g. WTI -5.5%). This came apparently on the back of news reports that recent combat activity in Southern Iraq had not affected supply. Perhaps. The chart picture is getting more messed up by the day, as the tug of war between oil bulls (tight supply, years of ESG-related underinvestment) and bears (slowing economic growth) continues. In Swiss-German, we call this “Chrüsimüsi”:
Dr Copper meanwhile, the metal with a PhD in economics, has broken some near-term support and is now threatening to move below the 50-day MA:
This could have impact on bond yields, let’s have a closer look at that tomorrow, but for today, it’s time to hit the send button.
Enjoy your Wednesday and enjoy the markets!
CHART OF THE DAY
It is no big secret that I am longer-term fairly bullish on crude oil prices, albeit, and as indicated on several occasions, a major global recession could send prices easily back to the $70 level on a medium-term basis. However, I am really positive on energy-related stocks (mostly fossil, shame on me) and there are many reasons for that. Here is just one:
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Everything in this document is for educational purposes only (FEPO)
Nothing in this document should be considered investment advice
Past performance is hopefully no indication of future performance