{"id":55659,"date":"2024-07-16T07:36:29","date_gmt":"2024-07-16T07:36:29","guid":{"rendered":"https:\/\/thepatientinvestor.com\/?p=55659"},"modified":"2024-07-16T07:36:29","modified_gmt":"2024-07-16T07:36:29","slug":"small-caps-signal-risk-on","status":"publish","type":"post","link":"https:\/\/thepatientinvestor.com\/index.php\/2024\/07\/16\/small-caps-signal-risk-on\/","title":{"rendered":"Small caps signal Risk On"},"content":{"rendered":"

Falling Treasury yields and a surge in liquidity in financial markets is bullish for stocks, bonds and precious metals. The rotation from growth to value has slowed, while increased interest in small caps signals risk on<\/em> for stocks.<\/p>\n

Crude and base metals are weakening as demand from China slows. Uranium prices are also testing support, despite long-term growth prospects.<\/p>\n

Financial Markets<\/h2>\n

Bitcoin rebounded from $56K to $64K, confirming a resurgence of liquidity in financial markets. Retracement that respects support at $60K would strengthen the bull signal.<\/p>\n

\"Bitcoin\"<\/p>\n

Treasuries<\/h2>\n

Ten-year Treasury yields are testing support at 4.2%, reflecting optimism over an early rate cut. Breach of support is likely and would offer a target of 4.0%.<\/p>\n

\"S&P<\/p>\n

Stocks<\/h2>\n

The sector rotation between growth and value has slowed, with both the Russell 1000 Growth ETF (green) and Value (blue) advancing at a similar rate.<\/p>\n

\"Russell<\/p>\n

The S&P 500 made a small gain but the weak close and declining Trend Index warn of selling pressure.<\/p>\n

\"S&P<\/p>\n

The equal-weighted index ($IQX) shows a similar weak close, retracing to test support at 6800.<\/p>\n

\"S&P<\/p>\n

But the rotation into small caps continues, with the Russell 2000 Small Caps ETF (Pink) closing the gap with the large cap Russell 1000 ETF (blue).<\/p>\n

\"Russell<\/p>\n

Precious Metals<\/h2>\n

Gold respected support at $2,400 per ounce, signaling another test of $2,450. Rising Trend Index troughs continue to signal buying pressure.<\/p>\n

\"Spot<\/p>\n

Silver remains below resistance at $31 per ounce, with a lower Trend Index peak warning of secondary selling pressure. Another test of $30 is likely.<\/p>\n

\"Spot<\/p>\n

Crude Oil<\/h2>\n

Nymex WTI crude continues to test support at $82 per barrel. Breach of $80 would be a strong bear signal.<\/p>\n

\"Nymex<\/p>\n

Brent crude retreated below support at $86 per barrel. Breach of $84 would offer a similar strong bear signal.<\/p>\n

\"Brent<\/p>\n

Falling crude prices would ease the prospect of resurgent inflation and increase the likelihood of an early Fed rate cut.<\/p>\n

Base Metals<\/h2>\n

Aluminum broke support at $2,420 per metric ton, warning of another decline. Retracement that respects the new resistance level would strengthen the bear signal.
\n\"Aluminum\"<\/p>\n

Copper and aluminum tend to track each other closely, so the breach is bearish for copper as well.<\/p>\n

\"Copper\"<\/p>\n

Uranium<\/h2>\n

The Sprott Physical Uranium Trust (SRUUF) respected resistance at $20.50, signaling another test of support at $18.50. Breach of $18.50 would signal a down-trend for uranium prices.<\/p>\n

\"Sprott<\/p>\n

Several uranium stocks, apart from Canadian miner Cameco (red), are testing support levels. \"Uranium<\/p>\n

Conclusion<\/h2>\n

Treasury yields are declining as prospects for an early rate cut grow. Stock prices are also supported by rising liquidity in financial markets.<\/p>\n

The rotation from growth to value sectors has slowed but the move to small caps is accelerating, signaling a more aggressive risk on<\/em> stance from investors.<\/p>\n

Weak crude prices are also bullish for stocks and bonds. The prospect of lower inflation is likely to result in lower Treasury yields.<\/p>\n

Gold respected support at $2,400 per ounce, indicating another test of $2,450, boosted by the prospect of falling Treasury yields and a weaker Dollar. Silver lags behind, encountering stronger selling pressure and less domestic demand from China.<\/p>\n

Aluminum broke support, signaling a down-trend. This is a bear signal for copper which tends to track closely.<\/p>\n

Uranium is also looking bearish, with several stocks testing support levels.<\/p>\n

Acknowledgements<\/h4>\n