September is living up to its reputation | 29 September 2023

#SP500:

Stocks are struggling this month against a backdrop of higher interest rates and monetary policy uncertainty. Benchmark 10-year yields have surged around 40-basis points, surpassing resistance off the October 2022 highs. The SP500 is down nearly 4% on the month, and damage is beginning to mount. While September is living up to its reputation as being a weak month for stocks, seasonality cannot take all the blame for the selling pressure. In addition to a rally in crude oil, a nine-week winning streak in the dollar, and a ‘hawkish pause’ from the Federal Reserve this week, stocks have had to contend with nearly a 40-basis point surge in 10-year yields this month, which are now trading near 4.50%. Once again, the move in rates has proven to be too much too fast for equity markets to handle.

Trading recommendation: sell 4370 and take profit 4266.

XAUUSD:

During the September Federal Open Market Committee meeting, the Federal Reserve kept the target rate unchanged as committee members confessed that the job market has slowed since the last meeting. The main tweak in the latest statement covers the labor market. No longer robust, Fed officials highlighted that job gains have slowed in recent months, although still fairly solid. The three-month moving average has steadily declined for most of this year. With the current price hovering around $1930 an ounce, it is unlikely that the world's central banks will be actively buying precious metals for their reserves. Many metals have depreciated by 10-20% since the beginning of the year and regulators are likely to wait for a correction in gold before further increasing their gold holdings.

Trading recommendation: sell 1940 and take profit 1904.

#WTI:

Oil prices rose as renewed global supply concerns from Russia's fuel export ban countered demand fears driven by macroeconomic headwinds and higher interest rates. Russia stated the export ban, which has no end date yet, is intended to replenish its own supply and reduce prices domestically. Supply constraints on top of increasing demand are causing many traders to forecast a price of $100 per barrel of West Texas Intermediate crude oil. Crude oil and petroleum product inventories in the world's largest economies are 114 million barrels and 77 million barrels respectively below the five-year average. This is favourable for oil price growth. The International Energy Agency believes that the artificial supply deficit created by OPEC+ countries could trigger an energy crisis.

Trading recommendation: buy 87.35 and take profit 90.00.