Yet another dead cat bounce?

Yet another dead cat bounce?

31. maj 2022 fra CarlsquareLæsetid: 2 minutter

The Fed minutes released on Thursday, 25 May, initiated a strong rebound on the US stock exchanges. The market interpreted the minutes as if the central bank’s stiff stance on rate hikes had softened, meaning that rate hikes could be paused during the second half of the current year if needed. Last week, the S&P 500 closed up by 6.6 per cent.

Significant stock indices performance on Friday, 27 May, 2022, in one week and this year

Source: www.di.se,www.cnbc.com

A good measurement of investors risk appetite is HYG, an ETF for junk bonds. HYG is quite far out on the risk scale in the bond-sphere and can be viewed as an indicator of risk. HYG was leading the rally in the US, which is a good sign. A break above Fib 50 and falling MA100 would imply that the rebound on the stock exchange is not another “dead cat bounce”.

HYG chart (in USD), daily one-year chart

Source: Infront. Note: Past performance is not a reliable indicator of future results.

 

HYG chart (in USD), weekly five-year chart

Source: Infront. Note: Past performance is not a reliable indicator of future results.

However, the 10-year yield has not broken down through the support level of around 2.75 per cent, which is somewhat discomforting. If the 10-year yield does not break below the support, the chances of last week’s rally being a “dead cat bounce” still linger.

US 10-year yield (in %), daily one-year chart

Source: Infront. Note: Past performance is not a reliable indicator of future results.

US 10-year yield (in %), weekly five-year chart

Source: Infront. Note: Past performance is not a reliable indicator of future results.

Due to memorial day, the US markets were closed yesterday, Monday, 30 May. However, today, Tuesday 31 May, markets are open for trading as usual. Is there enough energy left for the index to test Fib 50 around 4 245? The chances would most definitely improve if the US 10 year yield broke on the downside.

S&P 500 (in USD), daily one-year chart

Source: Infront and Carlsquare. Note: Past performance is not a reliable indicator of future results.

S&P 500 (in USD), daily five-year chart

Source: Infront and Carlsquare. Note: Past performance is not a reliable indicator of future results.

 

The full name for abbreviations used in the previous text:

EMA 9: 9-day exponential moving average

Fibonacci: There are several Fibonacci lines used in technical analysis. Fibonacci numbers are a sequence of numbers in which each successive number is the sum of the two previous numbers.

MA20: 20-day moving average

MA50: 50-day moving average

MA100: 100-day moving average

MA200: 200-day moving average

MACD: Moving average convergence divergence

Important notice

This information is neither an investment advice nor an investment or investment strategy recommendation, but advertisement. The complete information on the trading products (securities) mentioned herein, in particular the structure and risks associated with an investment, are described in the base prospectus, together with any supplements, as well as the final terms. The base prospectus and final terms constitute the solely binding sales documents for the securities and are available under the product links. It is recommended that potential investors read these documents before making any investment decision. The documents and the key information document are published on the website of the issuer, Vontobel Financial Products GmbH, Bockenheimer Landstrasse 24, 60323 Frankfurt am Main, Germany, on prospectus.vontobel.com and are available from the issuer free of charge. The approval of the prospectus should not be understood as an endorsement of the securities. The securities are products that are not simple and may be difficult to understand. This information includes or relates to figures of past performance. Past performance is not a reliable indicator of future results.

16-08-2022 06:13:29

 

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