With the G20 summit out of the way, investors are wondering: Has anything changed?
Some thought yes. At least the Sino-US trade war is not worsening. That’s enough to cause some investors to dip back into risk assets, such as equities. A quick look at the US blue-chip S&P 500 Index suggests that its medium-term trend remains up.
Note that the index did edge to marginal new highs earlier (see here), but it failed to extend the breakout. SPX’s immediate pullback suggests lingering worries about the macro picture. Throw in Powell’s speech last week (here) that caused some traders to doubt if a July rate cut is really on the table, asset prices are not moving in a ‘one way street.’
This is certainly true for gold, where prices have corrected sharply of late ($1,440 to $1,390). Receding fear is one cause. Profit taking is another. By cutting through the $1,400 level, the metal is setting up a further correction into the prior resistance, now support, at $1,360.
And for bonds, their prices remain firm, but overbought. The US long-maturity bond ETF (TLT), for example, is making the second pivot high in a month (see below). Its uptrend is technically near-term stretched and might be vulnerable to a correction. But not all instruments correct at the same pace. Some faster; some slower. For TLT, its corrective pattern may require more time to develop.
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