The flight to safety that has recently been observed by reducing bond yields and positioning in safe-haven assets may end. Investors rushed to safe-haven assets while geopolitical tensions increased during the hot summer months of August. As autumn approaches and the temperatures cool, so do some of the tensions that seem to be putting investors back in a risky mood.
A volatile August
The month of August was cruel to the markets, with stock prices whipping in a range of about 4%. Stock market volatility caused interest rates to fall, while staples, utilities and gold rose. From July 31 to September 4, the Select Sector SPDR Consumer Staples ETF (NYSE 🙂 increased by almost 4%, the Select Sector SPDR Utilities ETF (NYSE 🙂 won more than 7%, while SPDR Gold Shares (NYSE 🙂 increased by more then rose 9%. That was better than the decrease of the S&P 500 by more than 1%.
The risk aversion trade can now settle. The, for example, had acted between 16 and 21 in August. But from September 5, that degree of volatility tests support for 16 and could go lower as fears subside.
Moreover, the golden ETF has risen because fears have also increased. But now GLD (NYSE 🙂 is up against a level of strong resistance at a price of about $ 149. The pattern in the graph is also known as a bump and run, a bearish reversal pattern, an indication that gold will fall. Meanwhile, the relative strength index (RSI) also flashes, because it was lower trending, despite the higher gold trend, a bearish divergence. Should gold fall under the upward trend at a price of around $ 143. It can fall back on support at a price of around $ 136.50, a fall of around 5%.
The Staples ETF also flashes some of the same warning signals. The technical graph shows the price increases in recent weeks, but forms a bearish technical pattern known as a rising wedge. Moreover, the RSI shows a bearish divergence for the ETF as the trends are lower, despite the ETF reaching higher prices. If the ETF falls below $ 60.90, it can weaken to around $ 57.75, a decrease of 6% compared to the price of around $ 61.20.
The Utility ETF also suggests that a withdrawal is possible. The RSI has risen above 70 and that would indicate that the sector is overbought. The last time this happened was in March, and the ETF then went sideways for the next two months
XLU – Utilities ETF card
But the big sign of the risk aversion fading is the S&P 500, which eventually exceeded its August resistance level at 2,935 and rose on September 5 at 2985, when investors began to turn back in risky sectors.
If the geopolitical fears that weighed on the markets continue to ebb in August, it seems likely that risk aversion trading will only continue to settle. This means that shares may again reach their highest point ever.