3 Key Correlations Pointing to Growing Risk Off Sentiment

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3 Key Correlations Pointing to Growing Risk Off Sentiment

Every week, we review the big picture of the market’s technical condition as seen through the lens of our Big View data charts.

Today, I want to focus on 3 key relationships ahead of this week’s meeting.

1. The versus the Long Bonds
2. The Junk Bonds versus the Long Bonds TLT
3. Gold versus the SPY

These relationships are all pointing towards risk-off, meaning that the equity market could sell off.

However, these relationships, if change this week, will prove invaluable for making your next investment decisions.

1. The SPY versus the Long Bonds TLT

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The first chart shows the long bonds TLT, the price action, triple play or leadership versus the benchmark, the calendar ranges and the real motion or momentum.

TLT price breakout was over 100. TLT cleared the July calendar range high a while ago and is in a bullish trend.

Momentum is steady ahead of the Fed decision.

The key here is that TLT outperforms SPY. That is risk-off.

One big clue this week is if TLTs rally more and SPY begins to rollover.

That will be negative for equities and more bullish for long-term bonds and most likely, commodities.

2. The Junk Bonds HYG versus the Long Bonds TLT

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This chart is extremely interesting.

Remember, as we know with SPY trading near the all-time highs, it is the relationships we need to watch.

Junk bonds look amazing and are well above the July calendar ranges.

What is scary though, is that HYG underperforms the long bonds TLT.

This is the next relationship that needs to be on your radar-if junk bonds sell off and long bonds rally, use caution as this is another indicator or risk-off.

Of course, if the long bonds sell off and junk bonds hold or rally more, that is better for equities.

Last week I did another podcast with Financial Sense (link below).

I have done several through the years. They are highly educated in the markets, and we often agree on many areas of where to invest or not, your money.

As you will see on the next chart of gold GLD, the topic of stagflation continues to play out and Cris Sheridan of

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agrees.

3. Gold GLD versus the SPY

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The gold chart and this most recent rally to new all-time highs, took a while, but was completely expected by us at MarketGauge.

We are long for our clients and have been so for some time now, and quite vocal about it too, I might add.

Gold has rallied to over $2600 as a flight to safety.

It is outperforming SPY which is risk-off.

The momentum is increasing as well as gold ******** well above the July calendar range.

Here again, is the key to what happens next in gold and SPY.

If gold continues to march higher, perhaps the reasons can flip to more inflation than just safety from risk.

And that also means lower prices in store for SPY.

3 charts, 3 relationships, 3 critical areas to watch without listening to analyst guesses.

ETF Summary

(Pivotal means short-term bullish above that level and bearish below)

• S&P 500 (SPY) 560 now pivotal
• Russell 2000 (NYSE:) 210 pivotal 220 resistance
• Dow (NYSE:) Near all-time highs
• Nasdaq (NASDAQ:) 465 support 477 resistance
• Regional banks (NYSE:) 54 support 57 resistance
• Semiconductors (NASDAQ:) 230 support 240 pivotal
• Transportation (NYSE:) Has to hold above 65 clear 67.00
• Biotechnology (NASDAQ:) 145 support 150 resistance
• Retail (NYSE:) 73.50 support 76.50 resistance
• iShares iBoxx High Yield Corporate Bond ETF (HYG) If you learned nothing else from us, junk bonds never went risk off and closed on new yearly highs.

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#Key #Correlations #Pointing #Growing #Risk #Sentiment

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