Bonds And Stimulus Are Driving Big Sector Trends

Falling Bonds and rising yields are creating a condition in the global markets where capital is shifting away from Technology, Communication Services and Discretionary stocks have suddenly fallen out of favor, and Financials, Energy, Real Estate, and Metals/Miners are gaining strength. The rise in yields presents an opportunity for Banks and Lenders to profit from increased yield rates. In addition, historically low-interest rates have pushed the Real Estate sector, including commodities towards new highs.

We also note Miners and Metals have shown strong support recently as the US Dollar and Bonds continue to collapse. The way the markets are shifting right now is suggesting that we may be close to a technology peak, similar to the DOT COM peak, where capital rushes away from recently high-flying technology firms into other sectors (such as Banks, Financials, Real Estate, and Energy).

The deep dive in Bonds and the US Dollar aligns with the research we conducted near the end of 2020, which suggested a market peak may set up in late February. We also suggested the markets may continue to trade in a sideways (rounded top) type of structure until late March or early April 2021. Our tools and research help us to make these predictions nearly 4 to 5+ months before the markets attempt to make these moves.

If our research is correct, we may have started a “capital shift” process in mid-February where declining Bonds, rising yields, and the declining US Dollar push traders to re-evaluate continued profit potential in the hottest sectors over the past 6 to 12+ months. This would mean that Technology, Healthcare, Comm Services, and Discretionary sectors may suddenly find themselves on the “not so hot” list soon. Continue reading "Bonds And Stimulus Are Driving Big Sector Trends"

Gold Could Be Setting Up For A Breakout

There has been quite a bit of chatter related to precious metals lately. The rally in Cryptos, particularly Bitcoin, and various other stocks have raised expectations that Gold and Silver have been overlooked as a true hedging instrument. As these rallies continue in various other stocks and sectors, Gold and Silver have continued to trade sideways over the past 6+ months – when and how will it end?

Gold Support Near $1765 May Become A New Launchpad

My research team and I believe the recent downside trend in Gold has reached a support level, near $1765, that will act as a launching pad for a potentially big upside price trend. This support level aligns with previous price highs (May 2020 through June 2020) after the Covid-19 price collapse, which we believe is an indication of a strong support level. As you can see from the Gold Futures Weekly chart below, if Gold price levels hold above $1765 then we feel the next upside rally in metals could prompt a move targeting $2160, then $2400.

Gold

The February 2021 Gold contract expires on February 24 – only a few days away. The CME Delivery Report shows an incredible amount of contracts already giving notice of a “Delivery Request”. This suggests that on or near February 25, a supply squeeze for Gold and Silver may become a very real component of price. Continue reading "Gold Could Be Setting Up For A Breakout"

Will 2021 Prompt A Big Rotation In Sector Trends? - Part 2

In the first part of this research article, we attempted to provide some details to the question of “sector trends in 2021 and what may shift over the next 10 to 12+ months”. In that section of this article, we covered the broad market sector trends and highlighted how the COVID-19 virus event changed the way the global economy functioned for 8+ months. It also highlighted a number of trends that were already taking place in the global market – Technology, Healthcare, Discretionary, and Comm. Services. Quite literally, the past 20+ years have been a digital revolution for most of the world and that is not likely to change.

What will likely change is the demand for Commodities, Raw Materials, Agriculture, and Manufacturing/Distribution related to these core materials. We believe any resurgence of the global economy post-COVID-19 will consist of a resurgence in the demand for commodities and raw/basic materials as consumers extend their normal consumption growth at exceptional rates.

The question in our minds is how will this transition take place and over how much time? Will it happen suddenly as new global policy and restructuring take place? Will it happen more slowly as the global economy re-engages and rebuilds? Will it happen aggressively, disrupting other sector trends? Will it happen in a way that supports continued growth and appreciation of major sector trends? Continue reading "Will 2021 Prompt A Big Rotation In Sector Trends? - Part 2"

Will 2021 Prompt A Big Rotation In Sector Trends?

An interesting question was brought to my research team recently related to sector trends in 2021 and what may shift over the next 10 to 12+ months. We took the effort to consider this question and to consider where trends may change over time.

The one thing my research team and I kept returning to is “how will the global economy function after COVID and how much will we return to normalcy over the next 12 to 24+ months?”

We believe this key question will potentially drive sector trends and expectations in the future.

When COVID-19 hit the globe, in early 2020, a forced transition of working from home and general panic took hold of the general public. Those individuals that were able to continue earning while making this transition moved into a “protectionist mode” of stocking, securing, preparing for, and isolating away from risks. This shift in our economy set up a trend where certain sectors would see benefits of this trend where others would see their economies destroyed. For example, commercial real estate is one sector that has continued to experience extreme downside expectations while technology and Healthcare experienced greater upside expectations.

Longer-Term Sector Trends– What's Next?

When we look at a broad, longer-term, perspective of market sectors, we can see how many sectors have rallied, some are relatively flat, and others are still moderately weak compared to pre-COVID-19 levels. The top row of these charts, the $SPX (S&P500), XLY (Discretionary), XLC (Comm Services), and XLK (Technology) sectors have all shown tremendous rallies after the COVID-19 lows in March 2020. We can also see that XLI (Industrials), XLB (Materials), and XLV (Healthcare) have all started to move higher recently. Continue reading "Will 2021 Prompt A Big Rotation In Sector Trends?"

Treasury Yields Suggest A Top Is Near

Historically, whenever the Treasury Yields fall below zero, then recover back above zero, the US/Global markets reach some peak in price levels within 3 to 8+ months. My research team and I believe the actions of the global markets may be setting up for a future peak in price levels sometime in the next 6 months. We believe this will start when the Treasury Yields cross above the “Breakdown Threshold”.

Expect a continued rally as long as yields stay below certain levels.

In 1998, a very brief drop below zero in yields prompted a minor pullback in the markets before the bigger top setup in 2000. This pullback in price aligned with what we are calling the “Breakdown Threshold” level on Yields near 1.20. After the Yields crossed this Threshold, briefly, in 1999, they fell back below this level and the US stock market continued to rally toward an ultimate peak in 2000.

In late 2000, Yields collapsed well below the zero levels and recovered back above zero in early 2001. Just 3+ months later, Yields had rallied above the Breakdown Threshold level (1.2) and the US stock markets had already begun to breakdown as well. This instance, the 2000-01 peak, took place after an Appreciation cycle phase prompted an Excess Phase Rally (the DOT COM bubble). The “Rollover Top” that took place near this top may be similar to what we see happen in 2021 if our research is correct. Continue reading "Treasury Yields Suggest A Top Is Near"