The Fork in the Road for Stocks Is Right Here, Right Now!
Currencies and bonds still mixed in their messages.
Treasury yields are bouncing – as they should. But this chart doesn't appear to be signaling much higher yields yet.
The yield on the 10-Year US Treasury Note ($TNX.X) has bounced – as the bulls would hope. However, it's is bouncing out of an oversold condition and appears to merely be setting things up for another quick shot lower (for wave "(v) & iii". At this point, the support for yields should initially be the recent low at 1.677% or perhaps just below that level. I show this chart because it's important for us to be aware of what's going on with interest rates. However, we all know the rates are being affected at least in part by the FOMC's QE operations, so any messages being sent must be taken with a grain of salt. That being noted, this chart's bearish tone is still giving me a "risk off" message.
Emerging markets debt has suddenly spiked in price – a short-term boost for the bulls.
One bullish development in bond land is the very short-term action in the iShares Emerging Market Bond ETF (NYSEARCA:EMB). The fund exploded higher recently and blew right through the 14-day moving average line resistance. It has stopped, though, right at one level of horizontal line resistance at just under 121.00. I cannot label the overall chart as bullish until I see a series of higher lows develop – but this short-term action is encouraging if you're a risk bull (especially considering how miserable all things related to emerging markets have been over the recent months).
US high yield debt still struggling to recapture its former bullishness, though.
The iShares High Yield Bond ETF (NYSEARCA:JNK) has been trading more bullishly as well. Wednesday's close was another step in the right direction (for the bulls) as short-term resistance was taken out. Now, the next step on the upside for JNK is the January peak at $41.13.
Here's a summary of today's findings:
I am forcing myself to be flexible with my market opinions – but it's not that easy. It feels like every fiber of my body is warning of an imminent pullback in risk asset prices. I will definitely be singing a more bullish tune, however, if the Aussie can break to new all-time highs and if the euro and Canadian dollars can take steps toward turning their charts bullish (from bearish currently). If I see anything in the next several sessions that gets me more bullish, I promise to share it on the Buzz & Banter (subscription required).
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