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Bonds Still Friendly to the Bulls; Currencies Are Close, but Not Quite There Yet

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Bulls are claiming victory in certain of our key tells, but the game isn't quite over yet.

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Remember where we are in the big picture in interest rates. The monthly chart below shows just how miniscule a move up to the 1.955% to 2.473% range would be in the macro sense. Sometimes when we see rates in the 1.548% - 1.75% range for such an extended period of time, we tend to think that such moves are out of the realm of feasibility – don't you believe it!


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High yield bonds are still pulling their weight for the bulls.

The SPDR Barclays High Yield Bond ETF (NYSEARCA:JNK) has had three bullish developments recently. First, there was the bullish reversal candle that took place on November 16 (see the bottom green circle). That reversal turned a very conspicuous bearish chart to a neutral chart in one session). Next, we saw JNK close above horizontal line resistance at $39.98 on the 19 (see middle green circle). Finally, over the last few sessions, JNK managed to close above its 60-day moving average and then proceed to put some distance between it and the average. The second and third technical developments have turned JNK's chart from neutral to bullish – certainly one where you'd want to be buying dips when they occur.


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Emerging markets bonds echoing the bullish action in JNK.

The iShares JP Morgan Emerging Market Debt ETF (EMB) crossed above its 14-day moving average over the last week and a half and has done a nice job of extending its gains since that breakout. The bulls can claim victory in this short-term battle just as with the JNK chart.


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OVERALL

I am inching my way towards being more constructive on the prospects for the risk markets with the bullish messages coming from bonds. Still, though, I would love to see real breakouts occurring in the key risk currencies as a confirmation of the positive action in stocks and bonds. If we get the breakouts in EURUSD and AUDUSD, I will be leaving my bearish friends behind and jumping into the bulls' camp!

Twitter: @tttechnalytics

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No positions in stocks mentioned.

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