US30 H4 Chart Signs of Support and Daily Chart Potential Rotation
US30
FXCM's Dow Industrials proxy, the US30, is showing signs of support. The green short moving average is above the slower orange moving average (blue rectangle). The stochastic is also showing a growing momentum and has moved above 80 (aqua arrow). The longer the stochastic stays in this area the great the likelihood of a swing movement in the US30.
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Past Performance: Past Performance is not an indicator of future results.
US30 vs NAS100
Below we look at the daily relative strength of US30 against the NAS100. The US30 is the numerator and the NAS100 is the denominator. The fact that the green EMA is above the orange EMA and that the RSI has moved above 50, shows that the numerator has started to outperform the denominator. The US30 represents a distinctly cyclical part of the stock market, whilst the NAS100 represents growth stocks. The relative strength here suggests a reallocation of portfolios from growth back into the cyclical side of the stock market.
Source: www.tradingview.com
Past Performance: Past Performance is not an indicator of future results.
Conclusion
The support and the rotation of capital for and into the US30 has taken place as the Fed pivots to the hawkish side and as the participation rate ticks up. Higher rates will tend to hit growth stocks hardest and the labour market improvement suggests that the needed solutions provided by growth stocks during lockdown may be on the wane. It is still early with heightened risk from omicron, but if the daily chart's EMAs develop angle and separation whilst the RSI maintains above 50, the relative strength of the US30 and cyclicals is likely to continue.
Image by Pete Linforth from Pixabay
Russell Shor
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.
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