Tough times for the US stock market | 03 Noviembre 2023

Tough times for the US stock market


#SP500:


The real yield on 10-year US government bonds is 2%, which is a long-term high. This indicator is historically highly correlated with the S&P 500 index. The basic idea behind this correlation is that as the yield on risk-free assets rises, investors become less interested in risky assets, shifting the risk/reward balance in favour of risk-free assets. This casts doubt on the claims of Wall Street's big investment managers that a bull market has begun. If we look at the sectors of the US stock market, out of 15 sectors, 6 have already broken through their 2021 lows, 4 are approaching these levels, 3 are between the 2022 highs and lows and only 2 sectors are above the 2022 highs.


Trading recommendation: sell 4169 and take profit 4014.


Tough times for the US stock market


XAUUSD:


The escalation of the conflict in Gaza and the risk of a wider war in the Middle East has pushed gold prices to all-time highs in terms of six developed currencies. If the escalation continues, the dollar price of gold could also reach an all-time high this month. The rise in the cost of producing gold is also a positive factor for gold buyers. There are virtually no rich ore deposits left in the world and companies are having to significantly increase investment in the exploration of new deposits, leading to an increase in production costs.


Trading recommendation: buy 1950 and take profit 1980.


Tough times for the US stock market


#WTI:


U.S. waterborne imports of crude from OPEC+ members including Saudi Arabia have dropped steadily over the last year, further tightening supplies in the U.S. while supporting other markets including Europe. Going forward, the level of U.S. crude imports from OPEC and other exporters and U.S. shipments to Europe will probably have a more direct impact on global oil prices thanks to a change made earlier this year to the WTI crude benchmark. Lower U.S. imports coincide with supply cuts by the Organization of the Petroleum Exporting Countries, Russia and other allies, and extra voluntary curbs from Saudi Arabia and Russia of a combined 1.3 million bpd until the end of 2023. The decision by Saudi Arabia and Russia to extend the voluntary cuts drove up oil prices to over $90 a barrel in late September. The cuts also tightened supplies of crude, particularly sour grades, ahead of the winter heating season.


Trading recommendation: buy 81.70 and take profit 84.50.

 

David Johnson
Analyst of «FreshForex» company
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