FusionIQ (Trader) had a market overview that went out to institutional clients and subscribers last week. What follows is an excerpt of that note. If you were on our TBP/IQ conference call last week some of this might appear familiar.

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The following was written by Kevin Lane, creator of the FusionIQ algorithms:

Equity market pullbacks have remained shallow and defensive havens such as Gold and Bonds are starting to correct as fund flows revert back into equities. This reallocation of asset class exposures will likely push stocks up more in the coming weeks and months. Seasonality trends for stocks still remain positive for the next few months, which is another plus. While nominal corrections can occur along the way we don’t see any major hiccups yet especially with; the economy gaining traction, liquidity for equities increasing (from bond and gold liquidations, in addition to sideline monies) and performance anxiety setting in as many managers fall deeper behind their benchmarks.

As seen in the chart below the TBT, an ETF that has 200 % inverse performance to the 20-year treasury, appears to have finally broken its bear trend with a high volume, bullish gap out of a base and above resistance (red lines). While the broad US equity markets may have some modest volatility/back and fill trading action in the coming days and weeks, we believe markets should generally move higher as investors move into risk assets in a, “I don’t want to miss the equity bus trade.” While this is not a comforting sentiment (ie investor chasing stocks), it will provide the necessary liquidty as asset flows shift into stocks. This liquidity will be the fuel that can move stocks higher, that is until it exhausts itself. Stayed tuned for updates on the latter thesis.

Click to enlarge:

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Source: Kevin Lane, FusionIQ

Category: Economy, Markets, Technical Analysis

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

10 Responses to “Equities, Treasuries, Gold & Financial Conditions”

  1. Mark Down says:

    WTF… the BR call of when we hit 13,000 we expect a ‘PULLBACK”
    Isn’t everybody on the same page over at FUSION IQ

  2. Pantmaker says:

    Great info, as always the big question is “what’s next ?”. Went to a Suns game last week..court side. Robin Lopez freakin 7 ft tall? It’s captivating to stand next to someone that tall because there aren’t too many of them walking around. It’s relatively rare. Took some photos, got some autographs slapped some backs. It’s was a fun game, we won, we cheered, had a great time. Then I went home and mean reverted back to my 5’10″ life.

    This is a Robin Lopez market.

  3. dead hobo says:

    Kevin Lane said

    Equity market pullbacks have remained shallow and defensive havens such as Gold and Bonds are starting to correct as fund flows revert back into equities.

    reply:
    ———-
    You’re the man. That’s exactly what I’m counting on. God, I love it when a confirmation bias appears out of thin air. Of course, you’re right. No, seriously, I’ve been going back in with a vigor and almost feel good enough about this run up to tell my elderly relative with the stock market betting jones that it’s OK to jump back in, although I won’t because nothing good like this lasts forever. I think it’s going to be a big one until and/or unless a liquidity crisis comes out of nowhere or things run so high we need a little flash crash to correct prices.

  4. snapwizard says:

    @Mark Down

    When we hit 13,000, BR clearly said a “possible” pullback and consolidation with more upwards movement. In any case conditions have changed since then as outlined in this post and hence more bullish outlook.

  5. “…conditions have changed…”

    as an aside, you know, for some, that, just, causes, un-ending, consternation..

    http://www.thefreedictionary.com/consternation

  6. inessence says:

    @DH…I concur, I also add that I believe there to be so mucking fuch money from mf managers and average joe/jane investor (who are on the other side of the trade as usual), that if this group decides to participate this will only perpetuate the upside. Bonds are a no win here as the fed is floating trial balloons as to a move to a more symmetrical policy stance in the not to distant future. Iran and the other players in the middle east are a flash point though.

  7. Petey Wheatstraw says:

    I see a well earned and well deserved correction followed by a completely new bubble.

    http://stockcharts.com/freecharts/historical/djia2000.html

  8. mad97123 says:

    Kevin Lane said – the economy gaining traction, liquidity for equities increasing (from bond and gold liquidations, in addition to “sideline monies”).

    I’ve never understood the “sidelined money” idea. Party A buys from Party B. Now Party B has the same amount of “sidelined money”. The only question that matters is how eager/reluctant Party A is to buy Party B’s stock. New money being created out of thin air (QE, margin debt) does create new demand.

    Mutual fund managers are already virtually “all-in”, so that does not seem like a bullish factor.

    http://home.comcast.net/~RoyAshworth/Mutual_Fund_Cash_Levels/Mutual_Fund_Cash_Levels.htm

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  10. HububBub says:

    Ah, yes. Money on the sidelines driving the rally. Ne’er was there a deeper understanding of what drives price..