To The Moon

On Monday (16 April), we saw the stock market started off on a positive note with major indices moving with an uptick. The confidence of investors came back after recent downturns, and investors buying the dip supported by the lack of economic negative impact by the Iran’s attacks on Israel.

As the session progress, we start to see investors’ initial optimism disappearing, we start to see selloff, but there is no specific news that trigger this pullback. We saw the situation worsened in the afternoon session after Israel’s Chief of Staff issued a statement hinting of retaliation against Iran, the selloff continue and finally the indices close near their session lows.

The most significant dip was NASDAQ fell 1.79% and S&P 500 fell 1.2%, dropping below its 50-day moving average.

Treasury Yield Gain Defense Stocks Initial Outperformed

Defense stocks like Lockheed Martin and RTX initially outperformed despite the geopolitical tensions, but RTX had a late-session dip. Treasury yields remain high, U.S. 2 Year Treasury Note staying above 4.9%, this indicate a lack of a strong safe-haven shift towards Treasury securities. The market’s afternoon decline was catalysed by rise in market rates.

U.S. Treasury yields continued their upward trajectory, with the U.S. 2-year Treasury yield hitting 5% and the 10-year yield reaching its highest point since November. This rise in yields reflects ongoing concerns about inflation and the economic outlook, influencing investor sentiment across various asset classes.

All S&P 500 sectors ended the day lower

We saw all 11 S&P 500 sectors ended the day lower, highlighting a widespread retreat. Financials has a modest drop of 0.5% even with significant gains from $Goldman Sachs(GS)$ (+2.9%), M&T Bank (+4.7%), and Charles Schwab (+1.7%).

The losses in mega-cap stocks and chipmakers worsened the downturn with the Vanguard Mega Cap Growth ETF (MGK) and the PHLX Semiconductor Index (SOX) falling 1.9% and 1.4%, respectively.

Strong March Retail Sales Failed To Lift Market

We saw 0.7% increase in March Retail Sales reported yesterday (15 April 2024), this has surpassed expectations. Also suggest that there has been continued consumer spending supported by a strong job market.

Other reports included a decline in the April NY Fed Empire State Manufacturing Index and a modest rise in February Business Inventories. The housing market remained stable, with the April NAHB Housing Market Index unchanged.

One of the potential stock we could look at is $Bank of America(BAC)$ , they have provided insights on potential earnings surprises for Russell 1000 stocks reporting this week. There is a chance that they could break estimate so we could position ourselves to take advantage.

Gold CFDs and ETFS Positive From Net Inflows

Gold prices have shot up to historic highs – outshining broader markets and driving up demand for gold ETFs. Gold CFDs are trading above the 50-day period and a potential by signal is coming.

If you missed the earlier buy point in end of March 2024, this might be a good time to look at it.

If we look at how investors has often use gold ETFs to diversify away from stocks and bonds. Gold has the lowest correlation to the S&P 500 of all asset classes.

It has been proven that Gold is a popular hedge against geopolitical risk (of which there is plenty) and, at times, against inflation. This is especially true at time of this writing that we have the ongoing Russia-Ukraine war and Iran-Israel developing conflict,

$SPDR Gold Shares(GLD)$ is trading above the 50-day period and the buying strength have been strong, gaining strength especially over the last 2 weeks. This is important to under how net inflows into gold-backed ETFs are doing to turn positive.

With ongoing inflation and geopolitical tension, we are seeing Gold making new all-time high, this is showing us that Gold is catching a strong bid.

Net inflows into gold-backed ETFs turned positive in March after 10 straight months of outflows as Gold’s price flirts with a new record high.

Investors added nearly 1 million ounces to all known physical gold ETFs in March, the highest monthly increase since March 2022, when investors added 1.4 million ounces. As of 31 March, total gold holdings stood at 93.2 million ounces, according to Bloomberg. 

In earlier chart, I have shown the best entry price for Gold price.

Summary

Amidst the downturn we experienced yesterday, we might be able to find some opportunity, there are some areas we could adjust our trading and investing strategy to cope with escalating geopolitical tensions.

Appreciate if you could share your thoughts in the comment section whether you think Gold will continue to go higher with more net inflows from investors as well as central banks.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.