Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

The Lead-Lag Report: Correction Case Returns (Thanks, Cyprus)

By

Reaction by intermarket trends to Cyprus suggests that the odds of a correction are once again rising. Not all is right in the land of the Nouveaux Bulls.

PrintPRINT
LAGGARDS: CYCLICAL BREAKDOWN

Energy (NYSEARCA:XLE) – Downward



Comments: The cyclical trade continues to underperform, with energy lagging alongside other globally sensitive growth plays. I suspect a stopping point will occur around the 0.50 level, but for now the trend remains down. Leadership, however, may ultimately coincide with emerging market outperformance to come.

Industrials (NYSEARCA:XLI) – Collapse



Comments: Industrials have had a huge move in relative terms since mid-October, coinciding with strength in emerging markets and a return of risk-taking. A second attempt to break the moving average failed, with a sharp breakdown, followed by another move higher. A complete collapse has now taken place, and may be an ominous sign about global growth expectations.

Emerging Markets (NYSEARCA:EEM) – Severe Breakdown



Comments: The severe breakdown in emerging markets has been nothing short of stunning, and may be nearing capitulation relative to the S&P 500 (INDEXSP:.INX). There will be a time when emerging markets are a fat pitch for equity bulls, but the ratio needs to recover persistently first before a trade can be comfortably made.

Conclusion

The case for a correction appears to be back on the table following the reaction of various intermarket trends to Cyprus. More time is needed, but the risks of a declining equity environment are increasing in probability, as the deflation pulse beats from overseas. The $85 billion/month question is if the honey badger US stock market will care. My firm's ATAC (Accelerated Time and Capital) models used for managing our mutual fund and separate accounts remain defensively positioned.

Editor's note: This update is published every week exclusively for Minyanville, and is compiled by Michael A. Gayed, CFA, Chief Investment Strategist of Pension Partners, LLC.

Twitter: @pensionpartners
No positions in stocks mentioned.

This writing is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction, or as an offer to provide advisory or other services by Pension Partners, LLC in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Pension Partners, LLC expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

PrintPRINT

Busy? Subscribe to our free newsletter!

Submit
 

WHAT'S POPULAR IN THE VILLE