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: V-Formation Failures


Many cyclical V-formations appear to have failed recently. Is the market finally starting to worry about the deflation pulse?



Small-Caps (NYSEARCA:SLY) – Head Fake

Comments: Small-caps relative to large-caps have just undergone a massive head fake, forming a V formation before cracking hard again. This could be quite problematic as it indicates risk sentiment is switching somewhat violently beneath the market's surface.

Industrials (NYSEARCA:XLI) – Collapse Continues

Comments: Industrials have utterly collapsed in recent months as the deflation pulse grew stronger, and the trend remains firmly down. Poor guidance and continued concerns over overseas economic growth have caused many to underweight the sector. I would not be surprised, however, if some stabilization soon kicks in.

Treasury Inflation Protected Securities (NYSEARCA:IPE) – Now What?

Comments: The IPE/TENZ price ratio is one way of seeing if inflation expectations are rising or falling within the bond market. When the ratio is trending higher, it means bets are occurring on rising prices ahead. Note that the ratio has been falling, indicative not of inflation but rather deflation concerns. Whether low rates cure low rates is unclear just yet, but the deflation pulse remains intact until intermarket trends say otherwise.


Many V-formations appear to be failing after a decent period of short-term strength in the cyclical trade. My firm's ATAC (Accelerated Time and Capital) models used for managing our mutual fund and separate accounts remain defensive given the direction of inflation expectations. More time is needed to see if a change will soon come, but the V breakdowns seem to be quite telling about underlying market sentiment.

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.

Featured Videos