From a breadth perspective, yesterday was a pretty balanced down day, with about 270 stocks falling and about 230 stocks rising.
The index has been trading primarily sideways since breaking a smaller inner rising wedge pattern. However, it is currently on the verge of breaking out of a larger outer rising wedge pattern forming the lower trend line of the bump-and-run pattern. For this rising wedge, you only need to open and lower the gap to see the break.
This is also present in , with a potential diamond top and a descending volume profile.
On the other hand, it rose 4 basis points on the day to reach 4.3%. This area is important for interest rates because exceeding the 4.35% level could cause a significant rise in the 10-year Treasury yield.
Additionally, the term premium for 10-year rates continues to rise, ending at nearly 25 basis points on October 29th. This suggests that some of the recent rise in US interest rates is being driven by investors seeking greater rewards.
If interest rates continue to rise, it will affect your financial situation. Mortgage rates have been rising, and the spread between conventional and jumbo rates has narrowed significantly over the past few weeks. Over the past several years, this spread has closely tracked the CDX High Yield Credit Spread Index, and S&P 500 Earnings Yield has also closely followed it.
Meanwhile, the price refuses to fall below $66. Once again, oil managed to rebound today following news that OPEC+ may delay production increases in December. So keep waiting to see what happens here.
Given where oil is traded, stocks haven’t fallen all that much. However, it is nearing the bottom of the range and has formed what looks like an upward pennant dating back to November 2020. The key price level to watch on the chart is $83.50, and a break below this level could lead to a decline in the price. It reflects the weakness of oil.
Typically, when we think about rising interest rates, we expect utility stocks to fall. However, with the AI boom and the expected increase in energy demand, the sector may be performing better than usual. Interestingly, this is somewhat reminiscent of the EV bubble, where many new EVs were introduced to the market but questions remained about whether there would be enough energy to power them all.
In any case, the uptrend of has broken. There is discussion about a secondary uptrend with XLU resting. However, the more important level is the support at $78, forming a potential double top pattern.
We know what will happen tomorrow.
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