The correlation between bonds and equities remains high, with the recent spike in bond yields causing weakness across the board in stocks.
The US dollar continues its meteoric rise, but the 75-basis-point interest rate raise by the ECB during the week has stopped the rot in the euro for now.
Central bankers are jawboning the markets both up and down. One minute they are telling us the pace of interest rate increases will slow soon, and the next, they are saying how determined they are to chase inflation down with more rate rises.
We are getting to a point where no one knows which way is up. In today’s ‘Closing Bell’ video, I thought I should outline the big-picture levels you need to keep an eye on going forward in the US 10-year bonds, the S&P 500, and the ASX 200, so you don’t get confused by all the noise out there.
While the long-term trend remains down, you have to tread carefully. If the low of the correction hit in June can’t hold, I think we could witness a sharp fall in equities that could be the final capitulation we need to see before markets will be ready to rally again.
You don’t want to be dumping your positions in a panic if it happens. You want to be sitting there cashed up and rubbing your hands together in glee, contemplating which bargains you want to grab.
Even though equities are in a tricky spot right now, it doesn’t mean there aren’t any trading opportunities at all. Uranium stocks have seen a sharp move higher, and there could be plenty more to come.
The news out of Germany that they won’t be closing down a few reactors by the end of the year as planned is another feather in the cap for uranium. After Japan’s announcement a few weeks ago about turning towards uranium again, the stage is set for a sustained rally in uranium stocks.
I give you a little explorer to consider at the end of the presentation today, and hopefully, you watched the ‘Closing Bell’ video from a couple of weeks ago about uranium and have already jumped in a few.
If you enjoy these videos, then please join me in a presentation that will be accessible until midnight on Tuesday. In it, I show you how I have been able to generate large returns for members of my trading service using a strict risk management system that allows us to go after large returns without risking our shirts.
If you are looking to work some of your capital a bit harder in the markets, but don’t like taking wild risks, then I think you will have a lot to learn by checking out my ‘30% Nest Egg’ presentation.
Until next week,
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Murray Dawes,
Editor, Money Weekend
