Emotions aside we think that trading macro market trends is rather simple, but only if you keep it simple! And that is what we attempt to do each day, identify primary trends (and by default capital flows) by analysing just a few key indices within each asset class. On a daily basis we believe that one can essentially sum up movement in markets by using just five charts:
- Equities – the Value Line Index
- Fixed Income – Barclays investment grade ETF AGG
- Commodities – Goldman Sachs Commodity ETF GSG
- Currencies – USD Index ETF UUP
- Real Estate – iShares ETF IYR
In the charts below the only bearish activity that we can find worth noting is the weakness of the USD Index, all other asset classes appear well supported in bullish trends that had their origins as far back as October last year. Clearly funds are being channelled into higher yielding assets even if it involves taking on board more risk. That being said we would not be surprised to see some weakness creep into equities over the coming days given how dramatically they have ramped up over the last few months. However, we would see this as a buying opportunity rather than selling.
Of course you can beg to differ with our perspectives; in fact we welcome objective criticism. There are many great sounding reasons as to why equities and commodities are about to fall over, but from our perspective the trends below look ever so powerful. Where they take us to who knows. Yes the market will break down when it is good and ready but for now that seems some way off.
Into the valley of darkness we go again, guided only by the light of our interpretation of what the market is telling us (kind of scary when you think about it).
[...] week, as we were last week (click here to see last week’s article) we are reasonably confident that a new multi-week low will be [...]