Market review 22.10.02
Market review 22.10.02
Focusing on monthly and quarterly charts
Hello everyone,
Lots to go over today.
At Friday’s close we got new monthly and quarterly charts. It’s very important to ground yourself with the big picture in this volatile market.
Quarterly charts
There’s no rosy way to say it: global markets are breaking down. Here’s Germany, Australia, and China:
Monthly charts
September lived up to its reputation of being an ugly month: DBC, TLT, and SPY were each down 7-9%.
Stocks closed Friday at the lows of the year. Meanwhile, TLT is now in a 40% drawdown (largest in its history) and has wiped out all net total return it had made investors over the past decade.
US sectors: Health care and railroads made new breakdowns.
Some more global charts…
XDV (Canadian Dividend ETF) just broke 8yr support
VEU (global ex-USA) saw a sharp decline in September after the summer rally ran into major resistance.
Behind this carnage everywhere is the steep ascent in bond yields and US Dollar Index.
TNX (10yr Treasury Yield) came out of a large base this month.
Exactly a year ago, the US Dollar Index came out of a 1yr base (tweet). It then made a bigger 7yr breakout in June and was up another 3% this month. This is considered a significant move in currency markets.
Oil vs. Gold
A month ago, I wrote how OXY was at 11yr resistance while WPM was simultaneously at 11yr support. I followed up a week later showing how oil and gold have been very uncorrelated.
Well, this month XLE fell more than SPY while GDX & SLV were up on the month.
WPM has done excellent after tagging support in early September:
And this week, we got the confirmation I was waiting for: GDX reclaimed a major support relative to SPX.
A mid-tier gold miner with big potential is KNT. Keep an eye on this leader which gained 17% this month.
“Buy the dip” Mentality
The bull market of the 2010s has conditioned us to “buy the dip.” You can easily convince yourself that right now is a juicy time to buy equities given:
Sentiment: AAII net bulls (2-week average) is at its lowest since 1990.
Valuations: Forward P/E for US small-caps is near the lows of the past 20+ years (link).
Seasonality: Bullish presidential cycle & best 6 months period are starting
VIX is over 30. Each time that happened this year, the market made a short-term low.
But we just saw the monthly & quarterly price charts today. The big picture is giving a clear indication that this market has materially changed.
This is what I had in mind when I wrote these tweets:
Willie says it well:
A good thread on this topic by Jim Bianco:
Closing Notes
Money market ETFs (discussed here a month ago) are now yielding near 4% with essentially no risk. Holding a good allocation in these products combined with lighter positions on trades, is what I’m doing during this time of high volatility and no leadership.
In Canada, we don’t have the luxury of locking-in a mortgage rate for 30 years but rather must renew every 5 years. Ours is resetting in Dec and we were quoted a 5.3% fixed rate. Paying down the mortgage suddenly is attractive as it’s essentially earning a 5.3% risk-free, after-tax return.
Be patient, be safe. Don’t be too eager to catch a bottom. The big money is made patiently riding trends.
Enjoy the rest of your weekend!
Twitter: @alphacharts.
Important Disclaimer: This blog is for educational purposes only. I am not a financial advisor and nothing I post is investment advice. The securities I discuss are considered highly risky so do your own due diligence.