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It looks like we are back to that risk on - risk off market. Risk assets, like equities and commodities, are down while bonds are trading slightly higher today. While this is really nothing new, the question investors should be asking themselves if today's action is a prelude to a more significant turning point. In other words, will bonds catch a bid while riskier assets take a breather.
Showing posts with label Equities. Show all posts
Showing posts with label Equities. Show all posts
Tuesday, May 3, 2011
Monday, May 2, 2011
The Bullish Case for Equities
Our indicator constructed from the trends in the CRB Index, gold, and yields on the 10 year Treasury has not been in the extreme zone for 8 weeks now , and within the context of a trend following strategy that I have detailed here, here, and here, the SP500 should have a positive bias. In essence, with prices on the SP500 above its 40 week moving average and our indicator not in the extreme zone, prices should move higher. The trend remains up and inflation pressures are neutral. This is the bullish case for equities.
Monday, March 14, 2011
Inflationary Headwinds Diminishing
The composite indicator constructed from the trends in the CRB Index, gold and yields on the 10 year Treasury is no longer extreme. As prices on the SP500 are above the 40 week moving average, this would be a buy signal as per our strategy that combines this filter with the 40 week moving average.
Tuesday, March 1, 2011
Still A Headwind
Strong and rising trends in CRB Index, gold, and yields on the 10 year Treasury persist, and collectively, this represents a headwind for equities.
Thursday, February 3, 2011
TheTechnicalTake: EEM and IYT
Lately, I hate to bring up any data point or indicator that is contrary to the market moving higher because nothing (and I mean nothing) has made a damn bit of difference to the constant and persistent march of the major equity indices moving upward over the past 4 months. Breadth divergences. Don't work anymore. Sentiment. Who cares? Inflationary headwinds. We don't have inflation. You get the picture. But being the hard headed soul that I am, I thought I would try again.
Wednesday, February 2, 2011
The Dollar Index: How Low Can You Go?
When looking at the Dollar Index, I am reminded of the song the "Cha Cha Slide"when the performer says, "How low can you go?" There is no question investors believe that the Dollar is going down and that equities are only going up all courtesy of Federal Reserve Chairman Bernanke and his QE 2 policy. Yesterday's rally in equities and concurrent drop in the Dollar served to remind me of the fact that currency devaluation and increasing liquidity remain the drivers for equities. It has been that way since 2007, and why should it stop now? For the record, the Dollar Index was down a hefty 0.86% yesterday while stocks enjoyed a strong trend day.
Monday, January 24, 2011
Inflationary Pressures Are Subsiding
As this headline from the Wall Street Journal shows, inflation pressures are just beginning to be recognized by investors.
Wednesday, January 12, 2011
Monday, January 3, 2011
We're Off!!!
As we start the new year, it is well worth repeating what I wrote on October 15, 2010: "In essence, higher yields are in the immediate future, and this should have negative ramifications for equities and commodities. Trends in gold, crude oil, and yields on the 10 year Treasury are rising and this in aggregate will put pressure on equities." Equities have continued to perform better than I would have thought considering the rising trends in Treasury yields, gold and crude oil. As we start the year off, it is the same old same old. If equities rise, then Treasury yields and crude oil will do so as well, and if I had a preference, this is where I would put my money. Think of it as a tax on higher equity prices that eventually will result in an equity sell off.
Wednesday, December 15, 2010
Inflationary Pressures Are Persistent
On November 8, 2010, our composite indicator that looks at the trends in gold, crude oil and yields on the 10 year Treasury registered an extreme value. At that time, I wrote: "A strategy that combines this "fundamental" filter with the 40 week moving average has given a sell signal." With rising Treasury yields and persistence in the trends in gold and crude oil, the composite indicator remains in the extreme zone. This is not the time to buy equities. For those keeping a scorecard at home and for those who are buying the bullish nonsense, the SP500 has gained about 1% over the last 5 weeks.
Wednesday, December 8, 2010
TheTechnicalTake: TLT
The move higher in long term Treasury yields, that I first started to write about on October 15, 2010, is beginning to pick up steam. This can be seen in figure 1, a daily chart of the i-Shares Lehman 20 + year Bond Fund (symbol: TLT).
Monday, December 6, 2010
An Investment Thesis for December...Not!
Here is an investment thesis for you: "Pro's performance worries will drive stocks" according to Jeff Saut, chief investment strategist at Raymond James.
Thursday, December 2, 2010
Still About the Dollar
While the S&P500 goes on to test the recent highs, let's make no mistake about it that the last 2 days of positive price action have been predicated on a falling Dollar. Of course, this set of circumstances is no different than the dynamic that has occurred since the March, 2009 lows: that the Dollar and S&P500 have been negatively correlated. A falling Dollar is good for equities and a rising Dollar is a headwind. Ok, nothing new here.
Monday, November 15, 2010
The Will Robinson Signal
With investors extremely bullish and company insiders extremely bearish and with the indicator constructed from the trends in gold, crude oil and yields on the 10 year Treasury flashing extremes, I am once again reminded of the robot from the hit 1960's TV show, "Lost In Space". When the boyish Will Robinson was in peril, the robot would fling his arms up and down and announce in robot voice: "Danger,Will Robinson, danger!" Historically, these set of market conditions should not be ignored. If the market hasn't topped out already, it should do so within a couple of percent of the recent highs. Rallies should be sold and stops tightened up. The market is prone to sudden sell offs. There will be better risk adjusted opportunities to buy in the future.
Sunday, October 17, 2010
TL's Q4, 2010 Outlook
As always, I am very pleased to present the work of TL, the analyst behind the very concise yet thorough "Morning News Notes" that we post most mornings to this blog. In this piece, TL presents his Q4, 2010 outlook for the equity markets.
Thursday, October 7, 2010
Dollar At Support, Bounce Likely
Figure 1 is a weekly chart of the PowerShares DB US Dollar Bull ETF (symbol: UUP).
Wednesday, October 6, 2010
Friday, October 1, 2010
Update On Two Trading Models
This is an update on two trading models that I follow. Both have provided "buy signals" for the S&P500 within the last couple of weeks.
Tuesday, September 28, 2010
An Obvious and Important Divergence
As you know, equities have been on a tear in September, and in this market environment, we also know most assets are highly correlated and tend to move together. At times, it seems like there are only two trades. There is the "risk on" trade as represented by equities and commodities, and there is the "risk off" trade when bonds outperform. This is nothing new and something that has been present for a long while.
Thursday, September 23, 2010
Dollar Devaluation: Pushing On A String?
Through the ups and downs of the stock market over the last 3 months, there has been one constant: the Dollar Index has gone down. This is surprising as the Dollar has barely managed a bounce following a very strong up move from November, 2009 to June, 2010. Even its safe haven status in times of market turbulence is now in question as traders have moved on to the Swiss Franc or Japanese Yen.
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