Soft Commodities Firming and Potentially Explosive

October 3, 2021

Weekly Market Outlook

By Keith Schneider


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Equity markets closed negative for the month of September led by the NASDAQ 100 (-5.5%) as US markets finally broke a multi-month winning streak.

Meanwhile the US dollar continued to outperform it peers. In fact, it appears that investors prefer it  over the Chinese Yuan even though the US could default on its debt obligations.

Bucking the selloff is DBA (Soft commodities). Currently it is the most explosive looking chart if it can clear recent highs and a 5-month compression zone.

 

This Week’s Market Highlights

  • Risk Gauges have backed off to neutral
  • All four of the key US Equity indices saw oversold momentum according to Real Motion, with Dow Jones (DIA), NASDAQ (QQQ), and the S&P (SPY) also being oversold on price
  • Sentiment indicators in the SPY got oversold, but are currently mean reverting and bouncing off oversold levels
  • IWM managed to close on the week in a Bullish phase
  • Volume Patterns show a neutral reading across the board, with QQQ being the weakest
  • McClellan Oscillator on SPY is maintaining a neutral-to-positive level
  • The Hindenburg Omen is still sending out a warning on SPY till year end
  • Bonds (TLT) sold off quickly, but saw a bounce from oversold levels and regained the 200-day Moving Average (DMA)
  • High Yield Debt (HYG) is outperforming Long Bonds (TLT), a bullish indication
  • Utilities (XLU) continue to underperform the SPY, despite typically being used as a risk-off play
  • Volatility (VXX) is continuing to consolidate and could have an explosive move if it sees a close above $30, another risk-off warning
  • Value stocks (VTV) are now leading both growth stocks (VUG) and S&P 500 (SPY) on a shorter-term basis, an indication that defensive plays are gaining strength
  • Biotech (IBB) crashed below its 200-DMA, Semiconductors (SMH) got hit hard losing the 50-DMA, while Regional Banks (KRE) are getting help from rising rates and closed positive for the week
  • Transportation (IYT) also held up well on a relative basis and is looking to regain its key moving averages which would be a big positive for equities
  • The Energy Sector (XLE), Oil (USO) and Natural Gas (UNG) were the leading sectors on the week
  • The most interesting chart across the board is Soft Commodities (DBA), looking to breakout from to new highs after a five-month consolidation pattern
  • Gold (GLD) may have doubled-bottomed

 

This Week’s CryptoPulse Highlights:

  • Bitcoin (BTC) cleared its 50-day Moving Average (DMA) to resume its bull phase after bouncing from oversold levels
  • Ethereum (ETH) has also cleared its 50-DMA, looking to regain $3,650 before tackling the $4,000 level
  • Uniswap (UNI) grew nearly 40% over the past 7 days as the new Chinese cryptocurrency ban forces Chinese traders to flock to more anonymous decentralized exchanges
  • Avalanche (AVAX) which has grown 485% in the past 3 months and has risen to #13 by market cap was listed on Coinbase this week, bringing the DeFi coin to the mainstream US market

 


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