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The Lead-Lag Report: Nouveaux Bulls Vs. Gray-Haired Bears

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Nothing has changed. Dow new highs be damned -- market internals continue to favor a correction. I will not back down on the case until intermarket trends say risks have faded.

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The more things change, the more they stay the same.
-- Alphonse Karr

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.

LEADERS: NOTHING IS CONSISTENT WITH NEW HIGHS

Consumer Staples (NYSEARCA:XLP) – Aggressive Defensiveness Continues



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. Either way, leadership is not consistent with a bullish environment for stocks.

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



Comments: The yield curve appears to be narrowing, 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. A flattening yield curve is inconsistent with a bullish environment for stocks.

Bonds (NYSEARCA:TENZ) – The Test



Comments: Bonds still appear to be in the early stages of outperforming stocks, and I suspect further relative strength could occur with a meaningful stock market correction. More time is needed to confirm, but the potential does exist for a powerful relative move to come.
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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.

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.

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