Everyone these days is talking about yield curves inverting. It's the topic du jour, similar to things like golden crosses and 200 day moving averages. The difference is that this one is more intermarket oriented. "Well if this happens to bonds and that happens to rates, then this historically happens to stocks, or the economy". Observing the behavior of one asset class to help make decisions on another is called Intermarket Analysis, or "Cross-Asset" in some more institutional circles.
I don't think there is much more for me to say at this point about the yield curve. The crew over at The Chart Report pretty much covered it all beautifully last week. The short end of the curve (10-year minus 3-month) turned negative, but the long end of the curve did not. The 10s-30s spread is steepening and controlled by free markets vs the fed controlled short end. We've seen this happen before, like in the 90s for example, without it sparking bear markets.
We've been writing about the slow improvement in price, momentum, and breadth over the last few months, leading us to err on the long side of stocks. With that said, we continue to see signals that Equities are not out of the woods just yet.
During last week's Conference Call we discussed a lot of the potential catalysts to drive Equities as an asset class higher over the intermediate/long-term, however, we continue to err on the cautious side given our outlook for sideways chop in the short-term.
Thursday I wrote about a growing number of potential "oopsies" (failed moves), so I want to follow up on that post and outline another group of charts that I think are suggesting short-term weakness in stocks.
If the US Dollar is falling, International Equities trading via US listed ETFs should outperform US Stocks. When the US Dollar is rising, International Equities should underperform US Stocks.
Sounds like a logical relationship, but as usual, it's not that simple.
During last week's Conference Call we discussed a lot of the potential catalysts for a lower US Dollar, so I wrote a free post talking about whether a weaker US Dollar means US stocks have to underperform International stocks. If you haven't read that, please do that first, because in this post I'm going to quickly touch on a short-term theme that continues to build within our Global ETF Ratio universe.
The Mystery Chart I posted Tuesday was a bit different because I told you what type of security it was and that it wasn't inverted. My objective with this chart was similar to what it always is, but more nuanced in that I was trying to get a feel for people's willingness to buy breakouts in stocks right now, or if there was any apprehension.
I received a ton of great responses via Twitter and email, so thank you for that. Let's get into those answers and the actual chart.
Do you live on the East coast and ever wonder what it would be like to be a trader on the West coast? Could you handle working on a much different schedule? In today's video, we chat with my pal Mehmet Gunay who I met during his time at SMB Capital when I lived in New York City. Today, he lives in San Francisco and seems to have adjusted pretty well to the time change and lifestyle. I would have to agree with him. I enjoy the west coast hours much better than when I lived in New York. The ability to do things after work with plenty of sun light left is very appealing.
When most of us think of bank stocks, we're generally not saying positive things. We have a bad taste in our mouth, particularly since early last year. But that's not the case in India.
Yesterday during our Members-Only Conference Call we discussed a lot of themes and trade ideas, but I wanted to highlight two charts that remain an issue for our bullish Equities thesis.
