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Zacks Investment Ideas feature highlights: iShares 20+ Year Treasury Bond ETF and Invesco USD Bullish Index ETF
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For Immediate Release
Chicago, IL – October 4, 2023 – Today, Zacks Investment Ideas feature highlights iShares 20+ Year Treasury Bond ETF (TLT - Free Report) and Invesco USD Bullish Index ETF (UUP - Free Report) .
3 Market Extremes Flash: What You Need to Know Now
2023: A Year of Extremes
Every market is unique and must be analyzed in its own right. However, the 2023 market is incredibly unique. Whether it is the historic dichotomy between tech stocks and the Russell 2000 Index, the abnormally strong jobs market mixed with an extremely “hawkish” Federal Reserve, or the falling inflation numbers coupled with exploding energy prices, this year will be one to remember and study for years to come. Below are 3 of the most extreme factors impacting the market currently:
Treasury Bonds
US Treasury bonds are considered to be a safe-haven asset. The iShares 20+ Year Treasury Bond ETF is an ETF that tracks long-term US Treasury bonds. When the price of TLT falls, it generally implies that yields on long-term Treasury bonds are rising. Rising bond yields lead to higher borrowing costs for companies and consumers. In turn, these higher borrowing costs eat into corporate profits and thus tend to drag down US equities.
Interpretation: TLT is working on its 6th straight down month and is trading at levels not seen since 2007! A relief bounce in the coming weeks would make sense at this juncture.
Panic Selling
Tuesday, equities were potentially working on a 90/90 washout day. A “90/90” down day refers to when the volume in declining stocks comprises 90% of the overall volume and when 90% of stocks decline for the session.
Interpretation: If the market can close with a 90/90 day, it would go a long way to proving that stubborn, underwater longs finally threw in the towel, and the market is ready to find a bottom.
King Dollar: A Strong US dollar can lead to weaker equity prices due to its impact on multinational companies, trade balances, and investor sentiment. When the US dollar strengthens, American goods and services become more expensive for foreign buyers, adversely impacting the earnings of US companies that rely heavily on exports.
Multinational companies, which generate a significant portion of their revenue overseas, experience reduced profits when earnings from other currencies are translated back into stronger dollars. Finally, investor sentiment is negatively impacted as a strong dollar often indicates economic challenges and a “risk off” mindset on the horizon.
Interpretation: The Invesco USD Bullish Index ETF is higher for the 12th straight week as it runs into old price resistance. Furthermore, UUP has an extremely overbought reading on the % Williams R technical indicator. An overbought % Williams R reading suggests that a stock or instrument needs to pullback. A pullback in the US dollar would be supportive of US equities.
Bottom Line
Extremes often lead to market bottoms. Three such extremes are flashing signals now that may be bullish for US equity markets into year-end.
Why Haven’t You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. Today you can access their live picks without cost or obligation.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Zacks Investment Ideas feature highlights: iShares 20+ Year Treasury Bond ETF and Invesco USD Bullish Index ETF
For Immediate Release
Chicago, IL – October 4, 2023 – Today, Zacks Investment Ideas feature highlights iShares 20+ Year Treasury Bond ETF (TLT - Free Report) and Invesco USD Bullish Index ETF (UUP - Free Report) .
3 Market Extremes Flash: What You Need to Know Now
2023: A Year of Extremes
Every market is unique and must be analyzed in its own right. However, the 2023 market is incredibly unique. Whether it is the historic dichotomy between tech stocks and the Russell 2000 Index, the abnormally strong jobs market mixed with an extremely “hawkish” Federal Reserve, or the falling inflation numbers coupled with exploding energy prices, this year will be one to remember and study for years to come. Below are 3 of the most extreme factors impacting the market currently:
Treasury Bonds
US Treasury bonds are considered to be a safe-haven asset. The iShares 20+ Year Treasury Bond ETF is an ETF that tracks long-term US Treasury bonds. When the price of TLT falls, it generally implies that yields on long-term Treasury bonds are rising. Rising bond yields lead to higher borrowing costs for companies and consumers. In turn, these higher borrowing costs eat into corporate profits and thus tend to drag down US equities.
Interpretation: TLT is working on its 6th straight down month and is trading at levels not seen since 2007! A relief bounce in the coming weeks would make sense at this juncture.
Panic Selling
Tuesday, equities were potentially working on a 90/90 washout day. A “90/90” down day refers to when the volume in declining stocks comprises 90% of the overall volume and when 90% of stocks decline for the session.
Interpretation: If the market can close with a 90/90 day, it would go a long way to proving that stubborn, underwater longs finally threw in the towel, and the market is ready to find a bottom.
King Dollar: A Strong US dollar can lead to weaker equity prices due to its impact on multinational companies, trade balances, and investor sentiment. When the US dollar strengthens, American goods and services become more expensive for foreign buyers, adversely impacting the earnings of US companies that rely heavily on exports.
Multinational companies, which generate a significant portion of their revenue overseas, experience reduced profits when earnings from other currencies are translated back into stronger dollars. Finally, investor sentiment is negatively impacted as a strong dollar often indicates economic challenges and a “risk off” mindset on the horizon.
Interpretation: The Invesco USD Bullish Index ETF is higher for the 12th straight week as it runs into old price resistance. Furthermore, UUP has an extremely overbought reading on the % Williams R technical indicator. An overbought % Williams R reading suggests that a stock or instrument needs to pullback. A pullback in the US dollar would be supportive of US equities.
Bottom Line
Extremes often lead to market bottoms. Three such extremes are flashing signals now that may be bullish for US equity markets into year-end.
Why Haven’t You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. Today you can access their live picks without cost or obligation.
See Stocks Free >>
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.