Comments for October 25, 2022

The markets experienced a strong bounce in the last two trading days on the hope that inflation would not be as strong as expected and hence that the Fed would raise rates slower than what was believed.



The 20DMF pushed higher, but the Cumulative Tick is still lagging.





The NHNL indicator also shows that there are still more stocks reaching new lows than there are stocks reaching new highs.



It is interesting to see that although US Treasuries and gold attracted some money on Friday, the 10Y rates continued to move higher.







This is bad for equities as the comparative yield analysis shown below tells us that corporate bonds are now more attractive than equities in terms of Yields.



Conclusions:

The market could try breaking above the $3800 resistance level, but I believe that valuations favor lower prices. The 10Y yields would have to fall back down to 3.9% in order to justify current equities prices.