From the desk of Steven Strazza @Sstrazza
It’s been about a month since small- and mid-caps resolved to the upside and made fresh highs.
As we all are aware, these were simply massive head-fakes. We’re right back to where we started–stuck in the middle of the same range we’ve been in all year.
There was also plenty of evidence from our intermarket relationships and ratios to support these moves. Discretionary-versus-staples ratios broke to fresh highs. Copper versus gold. Stocks versus bonds. Inflation expectations. They all made new highs recently. But, just like most stocks on an absolute basis, many of these breakouts have since failed.
Of all these developments, it’s hard to argue that any is more important than the stocks-versus-bonds ratio retracing back beneath its Q1 highs. With long rates making new lows and stocks selling off, let’s talk about how we are approaching both of these asset classes right now.