Global Macro Update
Equites & Bonds: Bearish newsletter advisors track by Investor Intelligence Survey, slightly decreased this week again. At the same time Volatility Index track by CBOE, remained at low 17 readings. US Treasury 30 Year Long Bond yields still refuse to rise in substantial manner despite a huge improvement in economic data and an equity market rally. Finally, the spread between Merrill Lynch High Yield Bonds and equivalent maturity US Treasury Notes, continue to narrow, dropping down to 6% this week. We are still in process of an improvement when it comes to the corporate credit market.
Currencies & Commodities: GLD fund flows, tracked by a monthly 4 week rolling average, continue to show inflows, however this week we experienced a 3 billion dollar outflow during Precious Metals panic sell off. Positioning on the US Dollar, tracked by the CFTC Commitment of Traders report, showed that investors are still slightly bullish on the currency. Positioning in the Commodities market showed that investors are are becoming very bullish on the asset class, with the rise in positions mainly attributed to Energy. Positioning in the Agricultural Commodities market increased towards a more neutral position this week.
Market Breadth Update
New Highs And Lows: The ratio between 52 Week New Highs and Lows, tracked by the NYSE data, showed that bulls remain firmly in control of the market trend. We do have a short term divergence, where equities keep moving higher on closing basis, while the 52 Week New Highs fail to follow through. Having said that, we have no significant or major divergences that usually signal a major market top just yet.
Trading Above 200 MA: The Percentage of Stocks Trading Above 200 MA, tracked by the S&P data, also showed that bulls remain firmly in control of the market trend. We have no significant or major divergences that usually signal a major market top just yet.
Sector Breadth: Overall market health as well as the current trend, can best be determined by following sector components trading above various moving averages. As we can see in the table above, last week was a major change in short term breadth, where overwhelming majority of sectors now have less than 50% of their components above the 10 day moving average. This could be a serious signal that majority of the market is now ready for a slight correction in near term.