Our ongoing argument has been that negative cyclical pressures are coming from the Eurozone and China while positive pressures are emanating from improving U.S. employment data.
The point is that each time U.S. weekly jobless claims stop declining the markets fixate on the negatives. Once the U.S. employment situation starts to improve the focus shifts back to a 'glass is half full' perspective. Last Thursday traders were selling 'risk' following the conclusion of the European Central Bank's meeting while on Friday traders were frantically covering shorts in response to the monthly U.S. employment report.
We noted on Friday that nothing much had changed. The same is true today. The long end of the U.S. Treasury market has not broken to the upside while the Japanese yen is still trading beneath the highs set at the end of last May. The S&P 500 Index continues in an upward sloping trading channel as sentiment swings widely almost on a daily basis.
Below is a chart of the CRB Index from 1981- 83.
Below we have included a chart of the S&P 500 Index from 2001- 03.
Below is a view of 10-year U.S. Treasury yields from 2011 to the present day.
For good or for bad... this is our view of the way the markets are going to resolve into 2013. Our expectation is that long-term Treasury yields are going to bottom out through the second half of this year and then higher into 2013. The 'Decade Theme' suggests that we will see some kind of major bottom for cyclical growth in the autumn of the '2' year with a period of recovery and rising yields through 2013. The first significant correction or consolidation tends to be made in the '4' year so look for long-term yields to rise through the first quarter of 2014 before correcting a portion of next year's gains.
The point is that we expect yields to follow a similar path to the S&P 500 Index in 2012- 13 as well as commodity prices coming out of 1982.
The chart below shows the U.S. 30-year T-Bond futures from late 2008 through October of 2010.
Below this is a chart of Japan's Nikkei 225 Index and the CRB Index from the start of 2011 to the present day.
The argument is that the cyclical trend follows or lags the bond market by two years. Since 'macro' arguments are rarely precise we have set up the charts so that the peak for bond prices in December of 2008 lines up with the top for the Nikkei 225 Index in February of 2011. This creates a 'lag' of 26 months.
If the 2-year lag is going to work then we should be fairly close to a point in time when the cyclical trend turns positive. The bond market was stronger through the second and third quarters of 2010 so we could see surprising strength over the balance of this year.
One 'break out point' to keep an eye on relates to the CRB Index. Commodity prices have been under pressure since the start of 2011 as the CRB Index made a series of lower highs and lower lows. A push above the 305 level would carry the index back above its 200-day e.m.a. line.
Below is a view of the CRB Index and the Hang Seng Index from Hong Kong. The Hang Seng Index is shown through two moving average lines .
A bullish cyclical trend should include a rising CRB Index confirmed by a 'cross' by the 100-day e.m.a. line up through the 200-day for the Hang Seng Index. In other words the higher the Hang Seng Index rises above 20500 the stronger the trend for cyclical asset prices.
Read More at TraderPlanet.com »
No comments:
Post a Comment