Market Radar 11. November 2022


Will yesterday’s gap be closed or not?

The IWM receives the day stamp “Buy or top-up” again for today. The same applies to the SPY, which is allowed to “show off” with this award for the first time since 19 August this year. After all, the QQQ was upgraded from “wait and see or speculate on sell-off” to “under observation”.

CPI data rocked the stock market

Consumer price data (CPI) published yesterday at 2:30 p.m. German time fell short of expectations. Consumer price inflation rose 7.7% year-on-year, below the forecast increase of 8.0%. Core inflation, which excludes food and energy prices, was also surprisingly weaker and finally began to fade after hitting a new 40-year high in September.

Yesterday we saw the biggest one-day increase on the Nasdaq and the S&P 500, measured on a day when new consumer price data was reported. These dates back to 1949.

In a Twitter tweet yesterday, Linda Raschle pointed out the gap pattern we saw yesterday in many indices, stocks and ETFs. Using the example of the SMH (ETF for stocks from the semiconductor sector), it shows that the last gaps were last closed within 2 to 3 trading days. If the gaps opened yesterday are not closed by next Tuesday, we should see higher prices at the end of November. In addition, the pattern would initiate a bottoming caused by an eruption gap.

Will semiconductor stocks continue to be bought?

Only then, when the semiconductor sector pulls strongly upwards, the bulls are likely to get the chance to stay at the helm sustainably. As long as cyclical industrial stocks in the building materials, steel and infrastructure sectors outperform stocks in the semiconductor sector, I personally continue to expect only a bear market rally. Yesterday, however, we saw that cyclical technology stocks achieved significantly higher daily gains than cyclical industrial stocks. More on that below.

Bonds to be upgraded

In the case of bonds, corporate bonds are once again given the daily stamp “buy or top-up”. The ETF for the 20-year US Treasuries (TLT) will be upgraded to “Under Observation” after being given the daily stamp “wait or speculate on sell-off” continuously since August 17, 2022.

Brazil’s stock market fell sharply yesterday

For today, I can only discover a gradation in the Brazilian stock market (corresponding ETF: EWZ). From today he receives the day stamp “Under observation”. The EEZ fell by 6.5% yesterday, contrary to the US market. The ETF for Latin America (ILF) can still defend the daily stamp “Buy the dip” for today. Perhaps a sector rotation away from Latin America and towards North America will now be initiated.

Are the euro and the gold price now on the verge of an upward push?

It is interesting that for today the EUR/USD will be upgraded to “buy or top-up”. The corresponding ETF (FXE) had to wait a long time for this day stamp: it last received it on June 2, 2021.

The gold price (GLD) will also be upgraded to “buy or top-up” starting today. The gold prize last received this award on April 21, 2022. The silver price was already upgraded to “buy or top-up” yesterday.

These manifold shifts in the market structure, which we can observe today in the awarding of the day stamps, indicate that we may now indeed be at the beginning of a trend reversal.

What did we see under the radar of the major stock indices?

Double-digit gains in Big Techs

Stocks from the technology sector were able to achieve the highest daily gains yesterday. We saw double-digit daily gains in blue chips from the technology sector. Some examples: Advanced Micro Devices 14%,
Amazon 12%, Applied Materials 10%, Block 17%, Ebay 10%. Nvidia 14%.

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