Broker Check
Markets Stabilize as Breakouts Unfold

Markets Stabilize as Breakouts Unfold

October 18, 2021

Key Takeaway

Global equities staged an impressive rebound from key support levels last week. Our indicators shifted to risk-on, which allowed us to deploy cash into sectors/stocks with relative strength such as materials, financials, and transports. We anticipate a strong Q4 for risk assets given favorable seasonal trends, especially around November. 

October is typically a volatile period for equities, which is why trading conditions are choppy and vulnerable to whipsaws. For now, several underlying metrics are stabilizing, which is a constructive sign. 

The copper/gold ratio broke above a five-month downtrend, and consumer discretionary stocks are attempting a similar breakout relative to consumer staple stocks. These breakouts suggest limited pullbacks and continued upside momentum into year-end.

XLY/XLP Breakout