Expected rate cuts from the Fed and further easing from ECB helped stocks to rally in the lead-up to US Independence Day celebrations. Most notably, all three major US indices closed at record highs in unison, providing the President more gleeful tweets through to the early hours.
The trend on the S&P500 remains undeniably bullish, although some measures suggest it could be a little overbought. But breaking to new highs is something we seem to be hearing more frequently. At least, it certainly feels that way. So we thought we’d take a look at past performance after hitting new highs, to see if it really is what it’s cracked up to be.
However, we’ll use a break of a 52-week high and assess forward returns between 1 to 20 days after, as this will provide more signals and allow us to assess the data with a more tradable timeframe in mind.
Summary From RBA Minutes on Monetary Policy
- Members judged that a decline in interest rates was unlikely to encourage a material pick-up in borrowing by households that would add to medium-term risks in the economy
- Risks to the forecasts for growth and inflation in both directions
- It was more likely than not that a further easing in monetary policy would be appropriate in the period ahead.
- Lower interest rates were not the only policy option available to assist in lowering the rate of unemployment”.
- In assessing whether further monetary easing was appropriate, developments in the labour market would be particularly important.
Since breaking out of its 7-month range, copper has developed a bullish trend structure and is showing signs of a potential bull-flag above the breakout level. With the 20-day average also supporting, we’re looking for prices to eventually break higher after its period of consolidation.
DXY looks set to challenge the 2018 peak, although price action near-term could be stretched. Beyond February seasonality points lower, so how it reacts around the highs could be key as we head into March.