There Are Signs of Fear Leaving the Market

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Stocks are bouncing today after Washington and Beijing exchanged tariffs. Beyond those headlines, various signs have suggested fear is leaving the market.

First, look at sector performance. In the last week, “risk-on” sectors like energy and industrials have outperformed by a wide margin.

The U.S. dollar has also weakened amid a rise in interest rates. That’s noteworthy because usually higher rates should lift the currency. The way the two are moving now suggests investors are simply dumping “safe havens” — in this case the greenback and Treasuries.

Speaking of foreign-exchange, there are also signs of risk appetite as the safe-haven Japanese yen loses ground. (It’s interesting to see the dollar and yen both weaken despite strong economic data in the U.S. and Japan.) Meanwhile, the volatility-inducing Turkish lira (USDTRY) continues to stabilize.

Another other “risk-on” consideration lit up TradeStation’s platform today: a bounce in copper (@HG). Yep, the metal often viewed as a proxy for global growth is enjoying its biggest daily gain in almost nine months. It’s also in the midst of forming a bullish “outside day” reversal pattern.

Copper futures (HG) chart showing outside days and 1-day percentage changes.

These positives follow other potentially bullish developments last week like transportation stocks breaking out and the S&P 500 finding support at old resistance.

In conclusion, this isn’t a trade recommendation and everyone needs to do their own homework. But right now the good news seems to keep coming.

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David Russell is VP of Content Strategy at TradeStation. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.