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The Lead-Lag Report: Corrective Behavior Underway


Intermarket trends have worsened meaningfully, suggesting that not only is a correction likely underway, but that it is very early in its move.

If there's not drama and negativity in my life, all my songs will be really wack and boring or something.
-- Eminem

Below is an assessment of the performance of some of the most important sectors and asset classes relative to each other, with an interpretation of what underlying market dynamics may be signaling about the future direction of risk-taking by investors. The below charts are all price ratios which show the underlying trend of the numerator relative to the denominator. A rising price ratio means the numerator is outperforming (up more/down less) the denominator.

For a full version of the Lead-Lag Report, click here.


Consumer Staples (NYSEARCA:XLP) – Aggressive Defensiveness

Comments: Consumer staples have bounced strongly off of a support level and have led in a vertical way since. Leadership seems likely to continue, though a period of weakness could occur for a few days given the strength of the move to begin with.

(More from Minyanville: Where Apple Is Now, and What Levels Are Worth Watching?)

Health Care (NYSEARCA:XLV) – Breakout Coming?

Comments: Health care has V-ed in what appears to be some defensiveness kicking in within markets as the Dow (INDEXDJX:.DJI) nears all-time highs. A break above the relative resistance of 0.287 appears to be taking hold. If confirmed with other areas of the market, it would suggest weakness in overall risk markets is likely to continue.

Long Bonds (NYSEARCA:TENZ) – Yield Curve...Flattening?

Comments: The yield curve appears to be on the verge of narrowing once again, signaling the return of a deflation pulse and risk-off period. Leadership in longer-duration bonds, despite talk of an end to bond buying by the Fed, is important to get a sense of sentiment within fixed income.
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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.

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