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Markets Stabilize as Breakouts Unfold

Markets Stabilize as Breakouts Unfold

October 18, 2021
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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