December Mid-Month Conference Call: 5 Key Takeaways

1. Bears Hold Court at the Index Level

One of the main topics we covered on last night's conference call was how the strongest sectors and indexes still need more time before a sustained uptrend can emerge.

When we look at the S&P 500 $SPX, sellers showed up at a logical level of overhead supply of around 4,100.

This level coincides with the AVWAP from all-time highs, the upper bounds of a downward-sloping channel, and the 161.8% extension from the COVID crash.

As long as the S&P 500 trades below this confluence zone of resistance, risks are to the downside and bears remain in control.

2. Defense Takes the Field

The relative trends versus the S&P 500 for Consumer Staples (XLP/SPY) and Low Volatility (SPLV/SPY) do an excellent job of illustrating the defensive behavior of markets.

With these ratios hitting their highest level in roughly two and a half years, investors play defense. We're anticipating further outperformance from these risk-off groups as they look poised to resolve higher from rounding bottom patterns.

Risk assets, especially stocks, will continue to experience selling pressure if these breakouts hold.

On the flip side, failed upside resolutions in these key intermarket ratios will provide an early indication of the tide turning in favor of the bulls.

3. Dollar Digs In

The US dollar Index $DXY finds its footing after experiencing significant downside pressure in recent weeks. Price currently tests a critical level of former resistance marked by a shelf of former highs.

With so much price memory here, this area represents a logical level for demand to absorb supply. So far, that’s the case as former resistance has become support. 

If the DXY begins to mean revert in the coming days, we can expect risk assets to come under increased selling pressure. 

On the other hand, a downside violation of this critical level will likely result in a tailwind for stocks and risk assets alike.

4. Rates Catch Support

When it comes to US Treasury Yields, we see a similar behavior as in the US dollar.

Below is the 30-Year Treasury Yield $TYX testing a critical polarity level. This support zone not only represents the summer highs from earlier this year but the highs of the previous cycle from 2018.

So far, this trend is intact, and as long as we're above these old highs, we’re looking for a presumption of the rising rate environment we’ve been in since 2020. However, a break below this level would indicate damage to the primary trend as well as a relief in selling pressure for long-duration assets.

5. Precious Metals Shine

Precious metals have all rallied considerably in recent weeks. While gold and silver have reclaimed critical levels of interest, platinum isn’t far behind.

The chart below shows our equal-weight precious metals index hooking back above its prior cycle highs from 2008 and the 1970s.

As long as we're above that shelf of former highs, our bias remains to the upside. We believe the precious metals space will provide ample trading opportunities in the coming weeks, months, and years.

To be clear, gold, silver and the whole lot of shiny rocks are off-limits if our index slips back below those prior cycle highs. 

As always, Premium Members can rewatch the Conference Call and view the slides here!

We hope you enjoyed our recap of this month’s call. Thanks for reading, and please reach out to us with any questions!

Allstarcharts Team