Charts Point to Big Breaks in These 4 Markets

Charts Point to Big Breaks in These 4 Markets

Technical analysis indicates that the S&P 500, international stocks, long-term bonds and gold may be set for major moves.

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Reviewed by: etf.com Staff
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Edited by: Mark Nacinovich

Technical analysis is now something financial advisors and self-directed investors need to at least be familiar with, even if they don’t commit to it heavily. 

ETFs make technical analysis much easier compared with decades ago, as they collectively track hundreds of market benchmarks.  

Today’s markets present an ideal moment to better understand the story the markets are telling us. The current market climate is one of the best times I can remember to assess things technically, and we won’t even need a single picture to do so. 

Here’s an intermediate-term picture. Note that technical analysis is not about “buy or sell” or “right or wrong.” It is best used to gauge how much risk is involved in the return one seeks in trying to profit from a particular exchange-traded fund. 

So, in short form, with minimal technical jargon, here’s what is going on in four major markets right now: 

S&P 500 

The elephant in the room is that the SPDR S&P 500 ETF Trust (SPY) is so top heavy, crammed with the “Magnificent Seven” stocks, it doesn’t reflect the broader market. That said, SPY has been in a volatile downtrend since August. That’s still a downward trend until, well, it isn’t. But it is at the same price as back in July 2021.  

SPY keeps making lower lows than the previous low and lower highs than the previous high. To break that trend meaningfully, it looks like a rally to about $450 would change the narrative somewhat. And after the recent spike higher (more than 6% in under two weeks), a chart “failure” here would put the $400 in play. So, there’s a lot more than usual at stake here. 

International

The iShares MSCI EAFE Index (EFA) is a good example of why technical analysis can be a great investor aid. Unlike the U.S. markets, it is not in a well-defined downtrend. It is in a trading range that has been less volatile. Though there is nothing uber-bullish about it, $65 to $74 has been its home all year, and it sits in the middle of that range now.  

Because this ETF owns stocks in Asia and Europe and then translates those local shares back into U.S. dollars, the market could be telling us that the dollar’s strong run is getting tired, allowing these companies to hold up. But that’s trying to tell the future, and as Yogi Berra said, predictions are tough, especially about the future. 

Long-Term Bonds 

The prices and yields on long-term bonds aren’t usually as volatile as they have been. The iShares 20+ Year Treasury Bond ETF (TLT) crashed by over 45% in the past three years, and now the bottom-picking contest seems to be on. 

It passed a minor test successfully when it bounced up from $82, matching its low from 2007. It rallied to $87, and now what? There are many hurdles to climb after such a price drop, and the next one is around $93. 

If it blows through that in a manner that doesn’t just look like a “short squeeze” or temporary “bounce” then there are much higher targets to shoot for. But this is about where rates go, and for investors, rather than traders, seeing the 10-year bond go from 5.0% to 4.0% would be nice, but it wouldn't be a total sea change, given how much “technical damage” has been done here. 

Gold 

Since the pandemic stock market bottom in March 2020, the SPDR Gold Trust (GLD) has been Lucy from the Peanuts cartoons, and gold investors have been Charlie Brown, trying to kick that darn football. But Lucy keeps taking it away. Translated to technical analysis, GLD has rallied hard toward $190 and has stopped there or below four times.  

With so many major markets reaching key technical points at the same time, advisors and investors may have to keep one eye on the markets when the other is on the egg nogg this holiday season. Because these “decision-time” charts could mean the market’s story is about to be a big one. 

Rob Isbitts was an investment advisor for 27 years before selling his practice to focus on ETF research and education. He is based in Weston, Florida. Contact him at  [email protected] and follow him on LinkedIn.