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Bulls Beware: Bond and Currency Charts Say It's Not a Pretty Picture Outside of Stocks

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Treasury yields may flip the bullish switch with a rally into today's close. Shy of that, though, bonds and currencies are telling us that all is not yet well underneath the surface.

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You must know by now that I love to see confirmation one way or another across asset classes before I jump in either the bullish or the bearish pools with both feet. Right now, it would be tough to take a plunge on either side. Bullish US and Japanese stocks are symptomatic of how hellbent the central bankers are to prop things up, so it's tough to be a bear. However, the fact that I see so many bearish divergences from both fixed income and currencies tells me to be skeptical of what I'm seeing in US stocks.

Even the action in non-US stocks is disconcerting. The iShares MSCI EAFE Index (NYSEARCA:EFA) and iShares MSCI Emerging Markets Index (NYSEARCA:EEM) funds are obviously struggling to find their footing technically. So outside of the US indices and the Japanese stock market, on what should we be hanging our bullish outlooks? Let's take a look at the largest, most-liquid markets in the world for some truth.

BONDS

The S&P nears resistance – but the 10-Year T-Note Yield is the key resistance we need to watch!

We're still below the historic range of resistance at 1550 - 1,576.09 for the S&P 500 Index (INDEXSP:.INX). The market is through earnings season and now it's past the monthly employment report here in the US. So is the coast all clear or is this to be looked at as if there's few if any new catalysts for the bulls in the next month or so? Are you a glass half full or a glass half empty type of a person?

Seriously, there are too many cross currents to give either the bulls or the bears the edge on this one. I'll spend some time this weekend on the various arguments and try to present them to you in report form early next week. For now, just know that there is no "all clear" being signaled just yet.


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Treasury yields have blown through short-term resistance levels this week. The key resistance level that we must watch into today's close is 2.054% on the yield on the 10-year Treasury Note. A close above that level will be technically significant and will likely force more money out of bonds and into stocks. A failure to hold the breakout (currently, TNX is at 2.052% as of 1:50 p.m. EST) could coincide with a turn back to the downside in stocks.


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No positions in stocks mentioned.

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