After two years on the canvas, this stock is showing signs of life

By Murray Dawes, Saturday, 06 July 2024

Also, market breadth falls as oil, copper and gold rally

When only a few stocks are causing all of the gains in the stock market it is known as low market breadth. It is often used as a canary in the coalmine that hints a rally may be nearing its end.

In today’s Closing Bell video Murray shows how far market breadth has fallen and also looks at the rally in oil and gold.

Last week I suggested that gold developer De Grey Mining [ASX:DEG] could be a good bounce back stock after the June tax-loss selling season was over.

I also had a look at Weebit Nano [ASX:WBT] but said it needs to have a weekly close above $2.78 before the odds of more upside increase.

De Grey opened the week at $1.14 and shot to $1.22 by Thursday, so hopefully you managed to grab a few early in the week.

It’s still a case of searching for needles in a haystack at the moment with stocks drifting sideways for months on end.

Oil, copper and gold have been performing well, with rumours of Chinese stimulus once again doing the rounds.

I kick off today’s Closing Bell video by looking at a comparison of the S&P 500 and the S&P 500 equal weighted index over the last 10 years.

It will make it very clear for you how much impact a few of the biggest stocks are having on this rally.

The equal weighted index is flatlining at the moment and is still trading near the high reached in 2022. The S&P 500, on the other hand, is powering ahead and well above the 2022 high.

A lack of market breadth is a classic sign of a market that may be getting close to a major high, so it is something we need to keep in the back of our mind as we move forward.

The long-term trend remains up so I am positioned for more upside, but I have a clear line in the sand below current trading levels where I will become more risk averse.

As I show you in today’s update, a monthly close in the S&P/ASX 200 below 7,500 (4% below current levels), is when the odds of a correction increase. But until then I’ve got the fingers and toes crossed the market can break out to a new all-time high and continue rallying.

I show you the situation in oil and gold after the recent rally and finish with a look at a former lithium market darling that is showing signs of life after spending the last two years on the canvas.

Regards,

Murray Dawes Signature

Murray Dawes,
Editor, Retirement Trader and Fat Tail Microcaps

All advice is general advice and has not taken into account your personal circumstances.

Please seek independent financial advice regarding your own situation, or if in doubt about the suitability of an investment.

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Murray Dawes is our resident expert trader and portfolio manager. He is a former Sydney Futures Exchange floor trader who went on to design custom trading systems and strategies for ultra-wealthy clients (including one of Australia’s richest families). Today, his mission is to help ordinary Aussie investors make profitable investments, while expertly managing risk.

He uses his proprietary system for his more conversative and longer-term-focused service Retirement Trader…and then applies the same system to the ultra-speculative end of the Australian market in Fat Tail Microcaps (this service is strictly limited and via invitation only).

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All advice is general in nature and has not taken into account your personal circumstances. Please seek independent financial advice regarding your own situation, or if in doubt about the suitability of an investment.

The value of any investment and the income derived from it can go down as well as up. Never invest more than you can afford to lose and keep in mind the ultimate risk is that you can lose whatever you’ve invested. While useful for detecting patterns, the past is not a guide to future performance. Some figures contained in our reports are forecasts and may not be a reliable indicator of future results. Any actual or potential gains in these reports may not include taxes, brokerage commissions, or associated fees.