23/08/2023
MARKET UPDATE 21 Aug 2023
HIGH risk, tread carefully.
As always, summarizing the market becomes a cleaner operation if you look at 3 of the most significant economic indicators:
oil (input to every good & service)
DXY (dollar relative to 5 other currencies)
US 10year yield (representing the bond market)
Oil
Oil has barely moved down on the back of a spiking DXY. Thus, a resilient oil price.
The trend, though pointing downwards, is battling with the momentum that has turned yet again to the upside.
If Brent Crude oil breaches the $88 price zone, expect oil much higher. This fuels inflation even higher.
Remember that in June & July, oil spiked round 18%, which doesn't yet reflect in CPI. Expect it to start showing in the August CPI.
INFLATION'S NECK NOT YET BROKEN.
DXY
DXY has breached the upper trendline marked by arrow. It was a good run and a pullback started last week. However, My opinion is that this pullback will be shortlived and will simply give the dollar more fuel for an upside move. The pullback coinsides with relieve rally in US markets on Friday, which will probably continue today and tomorrow even. Be prepared if the DXY breaches 103.70 price zone.
US 10year yields
So SVB bank failed when the yields were round 4.05 levels in March. We are now at 4.29'ish. You really think nothing else is on the verge of breaking?
The October 2022 levels were breached last week, so we have a higher high. Compounded by expected inflation to rise on the back of oil prices, yields could move up even further.
Apple
I am re-posting my summarised graph for Apple stock of 2 weeks ago which indicates in a nutshell, the reason for current market pullback. Stocks ran on FOMO, AI, call it what you want, not respecting the underlying fundamentals.
SUMMARY
The 3 indicators points to major risk in the market.
It is my opinion that the selloff in the market will commence later this week, as soon as the DXY rebounds.
Nvidia's report this week and Jackson's Hole could spark something.
Will SA be spared. Well, our markets followed the US last week, DOWN, so decide for yourself.
PS, Bitcoin has broken its year to date trendline down.
LinkedIn Profile: https://www.linkedin.com/company/investing101za/
Facebook Profile: https://www.facebook.com/cornesmit.77/
page: https://www.facebook.com/investing101za/
