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Why Are Bond Yields Staying Low?

 
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There is a 60-year cycle in bond yields which has existed since bonds first came about in the 1700s.  It says that bond yields should have ideally bottomed in 2010, and by now we should be well into a 30-year rise in yields lasting until 2040. 

But that is not how it has worked out.  Bond yields have stayed low 7 years beyond the ideal bottom date.  So is something wrong, or is the cycle broken?  Or perhaps is this just an normal sort of anomaly?

We have seen prior examples of bond yields... Read More

A Different Sort of Presidential Cycle

 
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It is by now an overused phrase to say that we are in a different sort of presidency right now.  And befitting that theme, we are seeing a really different sort of behavior of the market relative to the Presidential Cycle Pattern.

This week’s chart shows a version of our Presidential Cycle Pattern that is constructed by averaging together the stock market’s performance only in periods when there is a new president from a different party than the last one.  We have found that the market’s... Read More

Phillips Curve Is Not Even Wrong

 
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To paraphrase Wolfgang Pauli, the whole idea behind the Phillips Curve is “not even wrong”. 

A.W.H. Phillips studied the relationship between inflation and unemployment in the United Kingdom, and noticed that they were usually moving in opposite directions.  He therefore theorized that when unemployment is low (and it is hard to find workers), prices of things rise because employers have to pay more to hire qualified employees.  That led 2-3 generations of economists to undertake an effort... Read More

Treasury-Bund Spread Gives Early Warning of the End

 
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The 28-year record high spread between 10-year T-Notes and German 10-year “bunds” is finally starting to narrow just a bit.  This is a warning that the great bull market in stock prices from the 2009 low is in its last stages.  But it is not done yet.

Ever since June 2009, the yield on the US 10-year T-Note has been higher than its German counterpart.  It turns out that this is a pretty bullish condition, at least for as long as the spread between the two is rising.  As a bull market ages,... Read More

Narrow Range for McClellan Oscillator

 
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A quiet market is one of the hallmarks of a price top, when no one seems to care enough about risk to move the market very much in either direction.  The NYSE’s McClellan A-D Oscillator has recently been displaying some of that quietness, trading only a few points above and below zero until just the past couple of days.  That quietness in Oscillator readings is telling us something about that very complacency I was talking about.

So to look at it more quantitatively, this week’s chart looks... Read More

Correlation Between VIX and SP500

 
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When the normally inverse correlation between the VIX Index and the SP500 gets crazy, if offers us a great message.  That is the point behind this week’s chart, which is based on a great observation by Jesse Felder of www.TheFelderReport.com

Jesse first wrote about it in a Tweet here back on March 3, 2017, and that same day it was featured in a MarketWatch article.  I did my own investigation, which revealed that this is indeed a really cool insight. 

What Jesse did, and what I have... Read More

The Unexplainable 4-Year Rerun

 
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President Obama and President Trump are entirely different types of leaders.  No one would contest that.  And the second term of a presidential term is a lot different from a first term in the way that a president interacts with the public, with Wall Street, with Congress, and with the economy.  So there should not be any stock market similarity between Trump’s first term and Obama’s second term. 

And yet the pattern correlation to four years earlier which began during Obama’s second term... Read More