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Bullish Trends Are Still Holding Up in Risk Assets for Now, but How About October?

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It's time for risk assets to start building their strength into the end of the month/quarter, right? This week has been very ho-hum, but expect some better action in the next nine calendar days. After that, however, be careful!

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The daily chart of the TNX still says "up, then down."

The daily chart shows how TNX has crept lower this week as stocks have come in a bit. The fulfillment of the c wave projection of the abc correction would take TNX up to the 1.955% level – and even a bit beyond that. A close above 1.978% will tell me that 2.241% (and possibly 2.473%) will be tested eventually during wave iv. Wave v, when it occurs, should mean at least a test of the July lows in yield at 1.394%. It would be hard to imagine rates falling back down to those levels while risk assets were rallying. This is why I'm of the opinion that risk assets rally a bit further, then start to correct lower (while yields rally a bit further, then move back down to the lows).


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Junk bonds have corrected a little & may drop some more – but uptrend still intact so far.

The high yield bond market has been a go-to play for many investors looking for a risk alternative other than equities. The attraction is the obvious correlation to stocks but with the added bonus of a 6% or so yield. The chart below of the SPDR Lehman High Yield Bond ETF (NYSEARCA:JNK) shows the nice run that took place from the beginning of June until just a few days ago. It also shows a matching uptrend in the RSI for JNK. It's been pretty steady upside action for both price and the RSI with just a few days at a time of corrective action. That's where we may be right now – in another JNK mini-correction. To me, as long as the uptrend line remains intact for JNK, the bull phase for risk assets should be considered intact.


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No positions in stocks mentioned.

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