New Paradigm or Same Old?

This post is just me thinking out loud. I like to look back on my posts and see if I was on the right track with my analysis, or if I was way off, and if so why. I like to look at what happened in the past to see if there are any similarities that might give us some guide as to what to expect in the future.

These are a few charts that I will be looking at this year on an ongoing basis. If this is a new paradigm in the bond market, then we will likely see some very large rotations in most assets classes. Every time yields rose too sharply without the inflation to back it up it has not ended well for stocks and there has been a sharp reversal. We don’t want to guess what will happen. We want to let the evidence guide as as it unfolds. Just take it a week at a time, but know what the warning signs are. The warning signs will always show in the bond market first.

TNX mth showing the key level to watch. When a crisis starts, it is very difficult to see at first. It all depends what the Fed does with rates this year.

SAGG weekly is a bond bear ETF meaning you go long this ETF if you are bearish on bonds.

JNK mth is just in a consolidation. Nothing too alarming but it is important to watch the spread between junk and investment rated bonds.

TLT mth 20+ years bond ETF is still in uptrend. Have to watch this trend line.

TIP weekly is an inflation indicator. As you can see it is very flat. The Fed should not be raising rates aggressively this year. If they do there will be trouble.

See all charts below

BND mth total bond ETF have to watch that key red support line.

MTUM weekly momentum ETF is showing momentum stocks are still going ok. I will be watching this very closely.

Dow Jones Home Construction. Some say the Fed is lifting rates to try to get the millennials to buy homes. See if there is any sign of weakness going forward.

PKW tracks the large stock buy-back companies. If rates rise, there could be some unwinding of the large cap stock buy-backs.

XII mth institutional managers index. There should have been a reversal in 2016 but rates were still very low by historical terms and it turned out to be a correction only. See if the insto’s start getting out of stocks in any meaningful way.

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