To highlight how our short rates are trading, just look at the weekly chart of the two-year bond yield. Just sitting on support. I think it is heading down to the lower support which would bring this rate back to 3% or lower.
Turning to our market, I am including both the weekly charts of XMM (mining) and XFJ (financials). These two charts highlight very clearly what has been happening here over the past few years but in particular the deviation these two sectors have taken this year. Looking first as XFJ, plain to see that the battle with interest rates has certainly helped the overall trend here but dare I suggest that it is getting a bit extended.
The poor old miners XMM have had a hard time with commodities this year taking the life out of the sector. Of particular importance is the lower support line. I hate to say it, but I think ultimately this line will be broken.
For a different look again at our market, the next chart is XSO – the small All Ords. Just sitting at support at the close of the week looking quite vulnerable. On the lower part of the chart is the ratio of XSO to XJO. Bit of a sad trend and just as a note, in 2022 that ratio was sitting at 460 so this sector has certainly not kept up with the leaders over the longer term. Not saying they can’t come back into favour but at the moment they are certainly lagging.
Moving to the US, this chart shows the weekly close of the S&P (semi log scale). Note the break of the rather nice upslanting wedge. Tried to get back above it but has failed. Not a good look. The main uptrend is not that far away, and I suspect we will have a chance to look at it further when it meets that line.
And here is possibly one of the most important charts – DXY the US dollar. Look at that lovely trend channel – just so perfect – and I think this week, we will see that downtrend broken. Certainly need to watch this.
Now for a reality check. This year has seen a fantastic rise in gold with silver not keeping up the pace as I would like. So do you want to have something to worry about – have a look at this chart of PSLV (Sprott silver). I am not saying, at this stage, that it is a huge top but it certainly gives a less than exuberant picture. We need to see this form a clear bottom or break the downtrend – just anything - before we can relax on precious metals.
And the final chart as we look around the globe – Taiwan. Weekly closes on semi-log scale. Another nice uptrend broken. Interestingly note the similarity with the S&P above. Not so strange when all stock markets are governed by one big pool of money moving around the world. However, with so many raised voices over the past year, I have been surprised Taiwan has performed as well as it has.
And to end:
“Some may have to sell their homes, warns RBA governor”.
That statement really made me angry. And what are people supposed to do when they sell their homes? There is a shortage of rentals. This pain, in so many instances, was unnecessary or could have been eased. And with bank stocks running off the top of my charts…..
(20min delay)