Market Radar 10. July 2023

Oil hui, biotech ugh ?

Fears of persistently high interest rates dominated the past week

According to new labor market data released in premarket trading on Friday, more jobs could be created in the U.S. economy again. However, the increase in newly created jobs was somewhat weaker than expected. At 4.4 percent, wages rose slightly more than in the previous month for the year as a whole.

“The U.S. economy remains too strong for core inflation to fall back to two percent quickly, putting pressure on the Fed to continue raising rates this year and possibly keep them high for longer than expected,” Seb Vismara, an economist at BNY Mellon Investment Management, said recently.

This trading week marks the start of the earnings season, so such interest rate fears that dominated reporting last trading week could fade somewhat into the background in the coming weeks.
U.S. Treasuries hit new lows

Furthermore, most economists expect that the consequences of high interest rates will eventually lead to an economic downturn in the US – the procurement of cheap money is still not given and attractive alternatives to equities actually exist in the bond market. Nevertheless, the prices of mainly short-term US government bonds continued to collapse. For example, the 7 to 10-year U.S. Treasury (IEF) ETF closed at a 4-month low on Friday. On Tuesday, the IEF ETF tested the support around $95.95, which it has already successfully defended twice. However, this then tore on Wednesday, and in terms of chart technology, the IEF ETF is threatened with a further sell-off towards 92 US dollars. 

The ETF for US government bonds with maturities of 20 years or longer (TLT) was still able to hold above the low of early March despite an equally disastrous price performance in the past trading week, so that we did not see a 4-month low here on Friday.

Major U.S. stock indices remain in a sideways movement
We are currently seeing lower highs in the major US stock indices, both in the Dow Jones Industrial Average (DIA), the Nasdaq 100 (QQQ) and the Russell 2000 (IWM). This indicates a longer stay in a sideways movement.

S&P 500 with Swing-Long Chance
However, we see a higher high for the S&P 500 (SPY). For this SPY ETF, the Market Radar gives an entry signal for a swing long trade for this Monday. With appropriate risk management, traders could speculate that the interim high of June 30 ($444.30) will be reached in the SPY ETF this week (closing price on Friday: $438.55).
VIX on Thursday with panic attack

On Thursday, the CBOE Volatility Index (VIX) briefly crossed the $16 mark. We wrote in the market radar last week: “The 16 mark could now establish itself as a threshold for the emergence of small panic attacks.” That’s exactly what happened on Thursday – and thus a little faster than expected when the last market radar was written. But that could have been it. On Thursday, this little panic attack could have been a good occasion to increase intraday equity positions.