However, today I saw what looks like a turnaround in this trend since September. As oil went up, stocks went up and bonds went down by a significant amount. This is important event, because it signifies were in an early stage of another risk on move, meaning investors will once again take more risk in the equity markets rather than bonds. So I will be looking for a top in TLT . Stocks may still get a bit more gyration with oil , but we should be looking to buy dips.
Note: You can also read up on my related Stage 4 to Stage 5 of Intermarket Analysis, which previews a reasoning for when to take bets in Financials. In this case your best bets might be with European Banks.
Global deflation, that alarming argument is overrated. US is proud and strong, and with ECB and Bank of China recent action the rest of the world will grow strong. Don't follow the noise, follow the money.
Much has changed since 2008-09 backdraft. We have a great deal of liquidity that has near 0 velocity. Before we had a decent deal of liquidity with increasing velocity. This is because this liquidity was in the hands of middle class consumers. Now liquidity is tied to corporations and super wealthy. This liquidity jumps to asset classes that have the ability to perform with low amounts of risk. This money is ready to move once again to a low risk asset with assurance that it will continue to rise. Where is that ? Europe and Asia (most notably financials to start)
You can't have 2% inflation when all the money is locked up to only a few members. Smart money does not create bubbles nor inflationary risk or deflationary risk. Smart money goes where there is an opportunity for a return, however never reaching excessiveness.
You are right, central bankers cannot do much more. It is up to Governments now to create an environment that builds inflationary pressures. Force corporations to spend capital and generate revenue plus profits, instead of cost cutting for a larger profit. Which generates marginal revenues and increasing profits.
1st. RSI is forming a rising wedge as well as the price.
2nd. Price is engaged in original red channel, somehow fear kicked in and accelerated blue channel forms.
3rd. even if price breaks above the rising wedge for real, price just resume action in original red channel.
4th. having said that, the potential resistance blue zone will be between red channel top and the horizontal line if price breaks out
5th. else the blue channel will take charge
Hence, IMHO the breakout is real but not for long
Please do your own analysis in case you want to trade this :-)
That is a good find. When compared to SPY you can see that after every move down in TIP/TLT ratio we saw markets follow. This time is different. US has not experienced any sort of deflation, while there is suggested slow growth in Asia and obvious no growth in Europe (exception a few countries).
The peril of playing with ratio is:
There are 6 permutations of getting the ratio.
When ratio goes up:
1. inputs into only numerator, while denominator kept constant
2. numerator and denominator both increase, but numerator increase more
3. numerator increase a lot while denominator decrease a little bit
The opposite applies for When the ratio goes down.
BRUSSELS (Reuters) - European Union leaders did not enter into any negotiations on Greece's economic problems on Thursday, leaving the talks to officials who are to meet on Friday, the chairman of the EU summit Donald Tusk said.
"The leaders did not enter into a negotiation on Greece," Tusk told a news conference after Thursday's Brussels summit.
Greece, where the anti-austerity government of Alexis Tsipras took power in January, needs money to keep it afloat while it negotiates with the euro zone on what should replace a 240-billion euro (178 billion pounds) bailout scheme that expires in two weeks.
Euro zone countries want Athens to ask for a technical extension of the current programme to buy itself time until something else is agreed. Tsipras rejects that, arguing he won elections on promises of ending the bailout.
An emergency meeting of euro zone finance ministers on Wednesday failed to produce a statement or even an agreement for euro zone and Greek negotiators to continue talks before a last-chance meeting of euro zone ministers on Feb. 16.
But the president of the Eurogroup of euro zone finance ministers, Jeroen Dijsselbloem, agreed with Tsipras on Thursday to continue talks between Greek and euro zone officials to find common ground.
"I am optimistic that we will have an outcome on the technical process," Dijsselbloem told reporters.
But he added: "I am very cautious on the political side. It is going to be very difficult. It is going to take time. Don't get your hopes up yet."
After Feb. 16, EU officials fear that even if Greece were to ask for an extension of the current programme, there would not be enough time for some euro zone parliaments to approve it.
Once the bailout expires on Feb. 28, Athens will lose access to euro zone or market financing and its banks will lose access to European Central Bank refinancing or the 11 billion euro EU safety cushion for their possible emergency recapitalisation.
Greece would also lose eligibility to negotiate more time to repay the loans it got from the euro zone.