This is a weekly analysis with the objective of gaining an “understanding” of capital flows globally. We keep the number of charts down to just eight. We figure that any movement in capital flows will be picked up early in any one of these charts.
Equities:
The up trends appear healthy, with both emerging markets and the US stock market registering a series of higher highs and higher lows. The Vanguard Total Market ETF (VTI) is now above previous resistance at 47.50. Notice a drop off in volume in VTI, we think that this is merely trade returning to more normal levels and nothing to take too seriously.
Fixed Income
A perfect combination, US Treasuries registering multi-week lows intra week and the junk grade bond ETF JNK closing at a multi-week high. Given the extent to which US Treasuries have fallen over the last few weeks we would not be surprised to see some sort of rebound……but that would merely be a correcting of an oversold condition.
Commodities:
The broad Rogers Commodity ETF RJI closes at another multi-week high as does the base metals ETF DBB. Notice how higher prices are being supported by higher volume.
Currencies:
A multi-week high for the “high yield” currency ETF DBV suggests that the capital is flowing into yield producing trades. The USD Index remains close to a multi-week low with little sign of an impending breakout.
Conclusion:
We can see no evidence above market noise that suggests the trend in capital flows that began in mid March is under threat. Accordingly we expect a continuation of capital flows we have witnessed over the last 3 months. We are positioned accordingly (and of course crossing fingers).
