While December 1st brought out the bulls in nearly EVERYTHING, one area caught our attention.
In December 2019, I saw a similar chart showing an unsustainable ratio between equities and commodities, which started me on the notion that something had to give. Now that I see this chart, with emerging markets at 50-year lows versus the U.S. markets, that does not necessarily mean the ratio will unravel in a month, or 2 or even more. However, it does give us a focus for 2024, at least to watch emerging markets for signs that the ratio could narrow.
In 2020, after COVID, the equities-to-commodities ratio moved a lot. It did not sustain though as many commodities peaked by June 2022. But it was a great 2-year run.
Now, in 2023, there is another ratio many are watching — growth and mega-cap stocks vs. value and small cap stocks. On Friday, we saw that ratio come in a bit, with NASDAQ up .32% and the Russell 2000 up 3.09%. Historical distortions of relationships can offer investors great opportunities in all trading timeframes.
With emerging markets, China has been under tremendous pressure, while country funds like Brazil have done well (although still not keeping up with SPY. The monthly chart of EEM is elucidating.
EEM iShares MSCI Emerging Market ETF ended November and began December very close to the 23-month moving average. (Compare this to SPY, which started December about 3-4% lower than its all-time highs.) So, for timing, we love these monthly charts.
Should EEM clear the 23-month MA that is a start. The risk would be clear, under the low of the month EEM close over the 23-month MA. Then, we would look to see if EEM can clear what appears to be the scene of the breakdown crime, or at 42-43.00. And that’s how you play ratios-you wait for price.
I will be away until December 14th. Look for my Outlook 2024 “If You Can’t Stand the Heat, Don’t Tickle the Dragon,’ to be out very soon. It is packed with ideas for the new year.
Have a great couple of weeks!
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Mish in the Media
Mish makes the case for Vaxcyte (PCVX) and presents the bullish case for gold in this appearance on Business First AM.
Mish talksabout money supply, debt, the consumer, inflation and trends that could gain traction in 2024 with Nicole Petallides on Schwab Network.
On the Tuesday, November 28 edition of StockCharts TV’s Your Daily Five, Mish presents 6 stock picks with specific actionable plans.
Mish covers the technical setup for Palo Alto and how MarketGauge’s quant models found this winner on Business First AM.
Mish and Maggie Lake cover inflation, technology, commodities and stock picks in this interview with Real Vision.
Mish talks trading range, fundamentals, and how to think about commodities right now on Yahoo! Finance.
In this appearance on BNN Bloomberg, Mish covers the emotional state of oil and gold, plus talks why small caps are the key right now. She also presents a couple of picks!
Learn how to trade commodities better with Mish in this interview with CNBC Asia!
Mish and Charles Payne discuss why the small caps, now in mid range still have a chance to rally in this appearance on Fox Business’ Making Money with Charles Payne.
Mish talks about Tencent Music Entertainment on Business First AM.
Mish talks bonds with Charles Payne in this clip from October 27, recorded live in-studio at Fox Business.
Coming Up:
December 3-December 13: Money Show Webinar-at-Sea
December 14: The Final Bar with David Keller, StockCharts TV
December 20: Outlook 2024 with StockCharts
December 22: Yahoo! Finance
December 28: Singapore Breakfast Radio
Weekly: Business First AM, CMC Markets
ETF Summary
S&P 500 (SPY): 450 support, 465 resistance.Russell 2000 (IWM): Now 181 has to hold; next resistance 190.Dow (DIA): 360 becomes pivotal support.Nasdaq (QQQ): 388 now pivotal.Regional banks (KRE): 45 underlying support with 50.00 resistance.Semiconductors (SMH): 160-161 pivotal support.Transportation (IYT): Cleared 250 now has to hold it.Biotechnology (IBB): Big eyes here if holds 120.Retail (XRT): 65 now key to hold and 70 resistance to clear next.
Mish Schneider
MarketGauge.com
Director of Trading Research and Education