FEATURE

In today’s markets, keeping an eye on macroeconomic indicators can be just as important as analyzing individual stocks.

Interest rates, commodity trends, and market volatility all offer clues about where investors are heading and which sectors may lead, or lag, in the months ahead.

Charts like the 10-year Treasury yield, the copper-to-gold ratio, and the

help reveal shifts in risk appetite, economic momentum, and investor sentiment, giving those who watch closely a potential edge before broader market moves take hold.

Let’s take a closer look at what each of these three indicators is telling investors.

Rising interest rates could be one reason for a further market decline. Looking at the three year weekly chart one can see that since the fourth quarter of 2023 the

has essentially traded sideways between the round numbers of $40 and $50 (4-5%).

There were two bear traps with quick exceptions in late 2023 and early 2024, and again in the summer and fall of 2024, but the range remained intact. That range started with a bearish evening star in the first week of November 2023 at $50, but the $40 level has been rock solid since a bullish engulfing candle last April.

Since then there have been three bullish morning stars with doji candles in the middle weeks during September and October. A long bearish descending triangle has taken shape, and Thursdays break above could be powerful, as we know from false moves come fast ones in the opposite direction. This could now target the top of that range near $50 which could have big market implications.

The CBOE Treasury Note Yield 10 Year was trading around $42.85.

Investors often gauge recession risks by analyzing stock market behavior. One tool is the ratio of consumer staples to consumer discretionary sectors, where a rising ratio signals a defensive rotation.

Another lens is growth versus value stocks. The copper-to-gold ratio provides a macro perspective: when copper underperforms, as it is doing now, it points to a weakening economy.

Freeport McMoRan

is down 5% this week after the prior week fell 13%.

Copper

is an industrial metal, so its price moves with global economic activity, and when it lags behind gold, it speaks volumes.

Looking at the chart below, weakness has been apparent over the past year, starting with a double top last April and July, followed by a break below a bullish inverse head-and-shoulders pattern, and we know from false moves come fast ones in the opposite direction. The ratio is now forming a bear flag, suggesting further room to fall. Keep in mind that gold has softened recently, now 9% off its Jan. 29 peak just above $5,600, and copper’s inability to catch a bid against it is concerning.

Many use the CBOE Volatility Index (VIX) as a sentiment gauge. And it is becoming very comfortable, at the bulls’ expense, trading above the round $20 number.

Over the past year, bouts above this level have tended to be short-lived. It has now posted eight consecutive closes above $20, which is clearly creating turbulence in the equity markets. Last October and November recorded four and six closes, respectively, above $20 before falling back into teenager status.

Looking at the big picture, the VIX is trading just beneath a double bottom pivot of $29.09. A breakout, even if it occurs, would likely be short-lived but could create plenty of market drama. Investor confidence seems extremely low so I am looking for a pullback in the instrument and do not think the huge bearish dark cloud cover candle from March 9 will be taken out to the upside. It looks eerily similar to the same type of candle from Oct. 17, whose top was not taken out until this week.

If those highs are breached on the upside a quick move toward $60 from the Liberation Day lows last April 7, which recorded a bearish counterattack candle, could come into play.

The CBOE Volatility Index was trading around $27 Friday.

Doug Busch is the senior technical analyst at Barron’s Investor Circle. His technical view is added to stock picks, including those published exclusively for Investor Circle readers. A glossary of technical terms is updated regularly with new entries.