My goal over the past few weeks has been to point out the risks that stocks could keel over again are rising.
The ASX 200 may be just 5% from its all-time high, but the price action over the past 18 months has been quite bearish, and there is a strong case that we’re witnessing a slow topping formation before a more substantial sell-off.
Interest rates are racing higher as markets adjust to the ‘higher-for-longer’ theme, and stocks have held up pretty well in the face of those changing expectations over the past month.
But the S&P/ASX Small Ordinaries Index [ASX:XSO] remains 20% below its all-time high. It’s a tale of two markets, with large-cap bank and resource stocks doing well but everything else is struggling.
The speculative end of the market is in a serious bear market, with many stocks continuing to trend lower and lower every day.
If you like playing around in the smaller end of the market, you should keep your position sizing pretty small and be prepared to wait out further downside.
Until interest rates peak, stocks are going to find it tough.
Commodities are starting to feel the heat from the rising US dollar, but copper is holding up better than most.
In today’s Closing Bell video, I give you a quick overview of the bearish case for stocks in the immediate future and show you the affect changing interest rate expectations is having on the US dollar, Nasdaq, gold, copper, nickel, rare earths, and lithium.
Until next week,
Editor, Money Weekend