In this post, I’ll focus on setups that I’m monitoring for both long and short positions. With a chart and short write-up, this is a quick way to scan and plan potential trades.
These ideas are the end result of my process to identify stocks offering the right combination of growth fundamentals along with a proper chart setup. Live alerts are sent to Traders Hub members only.
Stock Market Update
A report pointing to rising economic activity and easing inflationary pressures coupled with renewed efforts to lower long-term interest rates is boosting sectors sensitive to liquidity. The latest data covering activity in the domestic manufacturing and service sector of the economy show activity expanding at an accelerating pace, with S&P Global’s Flash U.S. PMI coming in at 56.0 compared to 54.5 last month. A reading over 50 indicates expansion, with the monthly gains concentrated in the service sector of the economy. The chart below overlays the U.S. composite PMI with annualized GDP growth, with the PMI hitting the highest level in over four years.
While the PMI report shows output prices remaining above the 50 threshold, recent months have seen a deceleration alongside some moderation in consumer inflation. That hasn’t stopped longer-dated Treasury yields from rising to the highest levels seen in nearly 20 years, so the U.S. Treasury is stepping in to intervene by doubling a buyback program to purchase long-term bonds. While the move is being described as providing liquidity, the real reason is a form of yield curve control where short-term bonds will be issued to fund proceeds for the buyback program. The program size will increase to at least $4 billion, which is a negligible amount relative to the amount of Treasuries outstanding that’s crossing above $40 trillion (chart below). But the intervention shows that officials are watching rates with concern and are willing to take action to stem the rise in yields.
More evidence of a strong economy that supports the earnings outlook and moves to boost liquidity are more tailwinds for the stock market and are delivering a boost to liquidity-sensitive asset classes including gold and Bitcoin. Gold mining stocks are back to showing relative strength, and are setting up new basing patterns.
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