Equity Markets Continue to Lift Despite a Lack of Clear Confirmation From Other Asset Classes
Stocks say "yes" while bonds, currencies, and commodities are saying "maybe" at best and "hell no" at worst.
Sea Change's krona / franc indicator is still trending lower off of recent peak – signaling more corrective action in equities to come.
The spin-off of the Franc analysis above is our firm's krona / franc indicator. When the dark red "spread" line in the middle of the chart below is trending higher, it's positive for stocks. When it's trending lower, it's negative for stocks (on a leading basis for each scenario). Right now, despite the short-term rise, the trend is lower for the spread line, which keeps this indicator in "risk-off" territory for now.
The British pound is nearing important "correction" resistance.
I thought I would throw in one more currency futures chart this week – that of the British pound (@BP). The pound is nearing critical "correction resistance" on the chart and theoretically (given the bearish overall nature of the chart) should turn and reverse lower soon. I would be looking for ways to play the short-side of the BP given what this chart is telling me (maybe shorting GBPCHF is the play considering this chart and that of SF).
The yield on the 10-year Treasury Note remains (artificially) subdued.
No surprises here: The FOMC has rates pegged near the recent lows. Clearly this is the case, but there's no use complaining.
OVERALL FOR CURRENCIES AND INTEREST RATES
I'm still not seeing clear bullish evidence coming from the currency or fixed income arenas, although I will note that the action in SPDR Barclays Capital High-Yield Bond ETF (NYSEARCA:JNK) and iShares JPMorgan USD Emerging Market Bond ETF (NYSEARCA:EMB) (not shown in today's article due to time / space constraints) are acting more bullishly. Treasury yields remaining low like this have to be attributed to the Fed. Other than that, I just cannot give this equity rally the "all clear" for future gains, based on the evidence from the equity markets themselves as well as on the currency markets.
All of that analysis aside, though, I go back to what I opened with: the Tepper analysis. Maybe we should just keep all of this other stuff in mind as we defer to the Tepper theory for now; it seems to be the most profitable play for now.
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