Outlook for Bonds, TSX, SPX and Europe

October 12, 20233 Comments

My thoughts on bonds, the SPX, Europe, and the TSX.

Bonds

  • “Over time, economic fundamentals should assert themselves, leading to Fed easing and bull steepening.” – Joe Lavorgna Chief Economist Nikko Securities

My take: Bonds are becoming attractive for an oversold bounce, given the probability of rates declining going forward. Given the broken chart, its not likely to be a long termed play.

  • “Market conditions over the last 10 months have seen each and every market moving event get priced in faster and faster on a relative basis.” Sam Skinner, Head of Institutional Equity Derivatives at Oppenheimer

My take: Markets move fast these days. We need to move fast too. If bonds move, they will do so ahead of the Fed. Then the party ends.

  • “Going back the last three decades, the average lag from the last hike to the first cut is ten months” – David Rosenberg

My take: Given the quote by Skinner – might we see a faster than average time lag before the first rate cut?

  • “A vast majority of participants continued to judge the future path of the economy as highly uncertain. Many noted data volatility and potential data revisions, or the difficulty of estimating the neutral policy rate, as supporting the case for proceeding carefully in determining the extent of additional policy firming that may be appropriate.” Fed Minutes from September

My take: Bonds look attractive for a bounce, but don’t get too overweight on the trade if you decide to enter it.

 

Europe & USA: Next few days are critical

The Euronext 100 Index is a market capitalization-weighted index of the 100 largest and most liquid stocks traded on Euronext. It represents the blue-chip segment of listed stocks on Euronext. Its been in a down-channel, much like the SPX of late. Its just tested major support just under 1300, much like the SPX tested its major support near 4200. Both are about to test the top of their neartermed trend channels.

In both cases, we need to watch for the trend channels to break out bullishly, and of course, for major support to continue to hold. If the channel test fails, expect a retracement to major support again. And if that fails….well, you know my thoughts. Don’t predict. Do prepare. This is why I use trading rules. You need to use similar rules (take my Online Course to learn how to apply them).

Of note: If you are not comfortable with doing it on your own in today’s uncertain markets, contact ValueTrend. We’ll explain how we manage money to provide predictable returns and limit your risk.

Meanwhile: We will hold our cash into next week, and see what happens.

 

TSX

Such a different looking chart than most large markets. The TSX remains lost in direction. Buy 19,000, sell 20,600 seems to be the trade.

 

Keith’s BNN show from Tuesday

Full episode: Market Call for Tuesday, October 10, 2023 – Full episode: Market Call for Tuesday, October 10, 2023 (bnnbloomberg.ca)

3 Comments

  • Hi Keith
    Do you have any idea what is going on with medical technology?

    IHI as a proxy is getting hurt.

    Thank you.

    Reply
    • I don’t know why its been breaking down Lance – sorry. Recent action suggests support broke–give it another few days to see if it rallies. If not…bad news for the sector.

      Reply
      • Thank you.
        The only news I could find was a positive trial of Ozempic.

        Ozempic was being trialled in end stage kidney disease and showed good results.

        These results are a proposed worry for med tech companies that supply equipment for dialysis – the thought is that their revenue would be adversely affected.

        Seems overblown.

        Reply

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