It is one of those “poetry in motion days”. Stocks were strong along with commodities, high yield bonds, high yielding currencies and emerging market stocks and bonds. These movements were supported by a weak USD and US Treasuries. It seems like there is a shift out of safe haven securities and into high yielding securities
TLT closed down another 1% confirming, beyond reasonable doubt, that US Treasuries (and by default world Treasuries) are in a bear market. We believe that the behaviour of the US Treasury market is the “king-pin” to the behaviour of other asset classes. The USD Index also broke down again and it looks increasingly likely that it will break below the 83 level….and if it does that then we will see it at 78 within a few weeks…….we continue to be positioned for US Dollar weakness.
The multi-week low in TLT coincides with a multi-week high Value Line index and another high in the Vanguard High Yield fund.
We are not particularly interested in the reasons as to why this behaviour is occurring, we are traders not economists and paid to make money rather than merely sound intelligent. We are trading with the mood of the market…….and right now it is bullish, and we will not be surprised to see continued bullish behaviour given the strength of high yield bonds and the weakness of US Treasuries and the US Dollar.
We think the best places to be in the equity market are commodities and IT. Have a look at the ETF KOL, it is poised to break to the upside over the coming days and it should be a dramatic upside break!
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