Latest / ausbiz a.m / 01.10.26 David Bird, Mastering the Markets
Transcript
- Andrew: Good morning and welcome to your morning wrap from OSBs. It is Thursday, October first, and we're expecting ⁓ sell-off to begin the new quarter, ASX Futures ⁓ down around point six percent this morning. In a moment, we'll preview the day ahead and well the quarter ahead with ⁓ with David Byrd. First though, look at global markets now lower than expected US PCE data out of the States, which saw inflation rise three point four percent on an annual basis. ⁓ saw the ⁓ two-year Treasury yield initially fall however the 10-year yield, rising to a new high of 5.3%. And the end of quarter rebalancing contributed to a late sell-off on Wall Street. The SP finished down a quarter percent. The Dow lost more than 0.8%. However, the NASDAQ, that was around quarter percent higher, supported by tech stocks with the Mag 7 all mostly higher. Brent crude up around 1% to around $103.50 a barrel, despite reports of increased flows through the Strait of Humuz. Gold at ⁓ just under four thousand two hundred an ounce, Bitcoin steady at three thousand ⁓ eight ⁓ eighty three and a half thousand dollars, I should say. And the Aussie has fallen further. It's now at around sixty nine point four US cents. Let's get across those market moves then and what is ahead. We're joined by David Byrd from Mastering the Markets. David, good morning. David Bird: Morning, Andrew. Andrew: So always an interesting time of course given where end of the quarter, beginning of a new one. ⁓ no doubt you've been looking at the charts. What are you seeing at the moment? David Bird: Yeah, I love the end of the quarter because I can get the end of the three-monthly candle, the end of the monthly candle, the end of the weekly candle, the end of the daily candle. So I can kind of see the big picture down to the small picture. ⁓ and a few noticeable things really stood out recently. so on the three monthly candles, everything's very overbought in America. So if you're looking at the Nasdaq SP five hundred, all those kind of things, they're looking very extended right now. But the thing that's kind of really standing out to me is the market breadth. So if we look back at some other kind of major tops, what you'll find is that the index holds up, but the stocks underneath start to sell off initially because, you know, the things that go go in the headlines are the index down. So right now the SP five hundred and the NASDAQ are barely down. They're down about one or two percent from from the high. But if you unpack the the market breadth of that. So if you look at RSP, which is the equal weighted SP 500, it's actually down seven percent. So the equal weight, which is where every stock in that index is worth the same percent, not the big boys to taking up 30, 40%, it's down seven percent, even though the SP 500 is only down 1%. If you then start looking at some of the other major indices, if you look at the Dow Jones Industrial, from the high, it's down seven percent as well. The Dow Jones transportation in particular, which can be a leading indicator, is down fifteen percent. So it's down or it's already in a bear market almost, even though the SP five hundred and the NASDAQs have be barely moved. So that was just a big interesting thing that I'd noticed there in America that the market breadth is really bad right now and that everything is very extended. And it looks like money might be kind of rotating into those really large, large caps. ⁓ so that they've got liquidity to to store store their money, I guess. Andrew: Mm. I mean there other factors at play too. I mean seasonality tend tends to come into it this time of year does we do see weakness. And of course you've got the midterms coming up. And David, we shouldn't ⁓ of course we need to sort of consider those ⁓ those bond yields too. As I mentioned, the ten year are now at five point three percent. David Bird: Mm-hmm. Yeah, yeah. The ten year and even like the thing with our tenure as well. So the the rate rise was not a surprise to me at all because those AU ten year had already taken out the new highs from last time as well. So a lot of people think that the RBA is the one that sets us up. They they have to just react to to the data. They don't have a choice. They have to react to the data in front of them. But the thing the thing that's a little bit scary is the AU ten year yield is at five point three eight percent right now. Through my charts, I have that, and again, this is not going to happen in the next week or two. It'll probably happen over the next one or two years. But I have that going up to about six and a over six and a half percent. So we're at five point three eight percent now. There's still probably another thirty percent upside on those yields. So I don't think it's Andrew: Goodness, you're saying over the next, what, one or two years it's gonna be persistent. David Bird: Yeah. O over the next one or two years. Yeah. And so I don't think that like it's not going to go in a straight line. There'll be zigs and zags along the way, but that's been my target that I've had from two thousand and twenty-one when they were below two percent. So it's not jumping on the bandwagon now that you had to go it up. It's been my my long-term target from before even the first interest rate came. ⁓ and that's that kind of yeah, sit above six and a half percent on that AU ten year. yield there. ⁓ and I think one of the major driving forces of that will be energy. Like if you look at oil, you look at oil ⁓ compared to all the key ratios. Oil to the equity ratio has only been down at this level three times before, which is 2000, 1966 and 1929 be before the Great Depression, et cetera. So even though people are complaining about the price of oil, it hasn't really kept up. with a lot of the other stuff from back in two thousand. Like even petrol now at two dollars. I was only paying eighty cents a litre back in nineteen ninety nine. So it's only two, two and a half s ⁓ times from tw twenty years ago. We're we're paying a lot more for groceries than that since since then. Andrew: When when you look at your charts, David, particularly over a longer term, do you draw historic parallels? David Bird: 100%. A lot of people when they look at a chart will only look at it compared to the dollar. I don't care about what it's doing compared to the dollar. I care about what it's doing compared to other major asset classes. So I will always compare it to the big four. So I'll look at bonds, I'll look at gold, I'll look at equities, the SP five hundred, and then yeah, I'll kind of see that. And then I look at Bitcoin for for crypto as well. So they're kind of the four major asset classes that I'll kind of see. Well, what's outperforming? Where's money ⁓ where's money going to? ⁓ and then from there you can kind of dive deeper. And that yeah, that goal to day ratio is one of the scariest ones because it's still down at major historical levels not seen since those key key rate key dates I just talked about. Andrew: Well, you mentioned gold. Let's go there, in fact. ⁓ precious metals, gold and silver, which ⁓ have been struggling of late. Yet you look at equities, not necessarily so. What's going on, do you think? David Bird: Yeah, so gold is down over twenty-five percent from the ⁓ from the high. Yet if you look at the gold miners, let let's look at a couple of our our producers. Northern Star is it's actually had a really good week this week. It w it's up about fifteen percent so far. ⁓ yeah. ⁓ but let let's look at them. Let the the largest one, it's only down about fourteen percent from the high. so the gold miners are actually Andrew: But certainly a bid a bit will help for the for its price, yeah. David Bird: They haven't sold off as much. And it's the same thing with the silver miners. So silver is down 50%, but still SIL, the ETF of the silver miners, it's only down about 20% from the high. So there's massive divergence in the sell-off from that. You've got to think if it was a major top on these asset classes and it's a leverage play to the asset, it shouldn't be, it should be selling off more. And even last night, Silver was down 2% and the silver miners are only down 1%. Even the silver junior miners were only down one 1%. And this recent rally that that we've had, silver only went up 25%, but the miners went up 45%. So there's a massive rotation right now. So if you look at the ratio of silver miners to silver or gold miners to gold, they're they've been outperforming from the high. So that's a massive. rotation happening right now, which is what happens in this next stage of the cycle, is that now that the asset has run and it's found its flaw up around those prices, all of these miners can now re- re-rant and go, okay, well let's say the silver miners have $18 or all-in sustaining costs. When silver was down at $25, $30, they're only making $10, $15. Up at $60, they're making an absolute fortune now. $120 they're making an absolute fortune, but even still now at $60 They're still making an absolute fortune compared to what they were two years ago. So yeah, money Andrew: So yeah, if you if you're in those gold and silver miners then David, what are you doing? David Bird: Yeah. So I'm I'm I'm in them. ⁓ I'm in them from from a while back. I'm in them from b beginning of April two thousand twenty four. But one of the big things I talked about was at the end of January, I said we're gonna get the top of a wave, but it's still the beginning of the cycle. So markets don't move in a straight line, they zig and they zag. If you look at the Nasdaq back from two two thousand and three going up to now, it's been in a raging bull market. But there were periods there for one or two years where you had those pullbacks. So you had pullbacks 2018, COVID, 2015, 20, 2012, 2010, ⁓ 2022, you know, so you still get those corrections against the primary trend. But as long as that primary trend is going up, that that's all that matters. So I believe we're in one of those phases now where you get in that healthy correction. How long that lasts is the million dollar question. But yeah, the fact that we're seeing that massive rotation out of the actual asset into the miners is obviously a a really good sign. And and I think the thing pip people don't realize is that gold only broke up when you adjust gold and silver for inflation, gold only just took out its nineteen eighty high last year when you adjusted for inflation. So and silver still hasn't even silver silver hasn't even taken out the 2010 adjusted for inflation price yet. So they're still very undervalued, even though they've had a big run on looking at the big picture, still very, very undervalued. Andrew: David, let's ⁓ let's round it out with a look at the local market then A six two hundred ⁓ as we begin the new quarter. What are your expectations? What are you seeing on the chart? David Bird: Yeah, so I know today's not looking too bad, but to be honest, I think over the the next week or so we should get a bit of a bullish move. You'll probably notice it sentiments very bearish right now. ⁓ people are, you know, worried with the interest rate rises, people are worried with ⁓ the the unemployment rise to f to four point six percent. So these are all things that you know the media is now going, it's gonna go into send. But the the fact is we've actually already moved from Pretty much ninety-three hundred down to eighty-six hundred. So we've had a pretty significant move in one direction. What's that? About a seven percent move in one direction in ⁓ in a couple of weeks now. So I actually believe we're going to get, even though today might be red over the next kind of week or so, a a move up towards the kind of eighty-nine hundred zone. So eighty nine hundred to nine thousand. And that's where then I would be careful of a future sell off. So we're sitting around eighty eighty seven hundred and something now. So we should get that move up towards the eighty nine to to nine hundred. And then that's definitely where I'd be particularly looking for some kind of reversal around there. Andrew: David, great to get across what you're seeing on your charts and what is ahead for those markets. Thanks for joining us from Mastering the Markets. David Bird: Pleasure. Thank you. Andrew: And that is your Ozbi's morning wrap. ⁓ hope you make the most of your day. I'm Andrew Gagan. Thanks for listening.