Australian Investment Blog

Five charts we are watching very carefully at present Some significant macroeconomic news hit the market last night with the FOMC (Federal Open Market Committee) minutes implying a US Fed interest rate rise as early as June, was a strong possibility. This announcement and subsequent interpretation sent the $US to a 7-week high, the Dow down over 100 points from its intraday high and commodities lower, led by the gold which fell almost $US20/oz. Also, two Fed officials who were interviewed yesterday said they anticipated 2 or 3 interest rate rises in 2016, if the data continues in the same firm manner. However they are concerned that investors have not factored these rate rises into their forward thinking. These movements coincide perfectly with our short term view on markets, which is a pullback in gold to the US1,200/oz area (~5%), a pullback in US stocks towards 2000 for the S&P500 (~1.5%) and further strength in the $US Index potentially over 111 (~6%). Noticeably, these numbers say we believe that US stocks will absorb higher rates comparatively well. S&P500 Futures "Death Cross" Monthly Chart As we can see in the above chart, the S&P500's 50-week moving average is getting close to falling beneath its 100-week. While this is clearly a lagging indicator it's called a death cross for a reason, the last two times it followed through the corrections for equities were very significant. It's our current opinion that this sell signal will NOT be generated, but the potential must not be ignored.
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