This historic bond market crash continues.

And to be fair, it might not seem like a "Crash" because bond market volatility is still relatively low.

So it's just been a slow painful grind lower.

But there's no evidence that it's over.

You can see the Japanese Yen continuing lower as well....

From the Desk of Steve Strazza @Sstrazza

Last week, we held our April Monthly Conference Call, which Premium Members can access and rewatch here.

In this post, we’ll do our best to summarize it by highlighting five of the most important charts and/or themes we covered, along with commentary on each.

Let’s get right into it!

From the Desk of Ian Culley @IanCulley

Rates are rolling over… 

And bonds are catching a bid.

After four months of steady selling pressure, US Treasuries are finally carving out a tradeable low.

Let’s take a look!

Regardless of duration, the following bond charts present an identical tactical approach.

Two key themes dominate these trade setups: entry points designated by price reclaiming the February 2024 lows and initial targets set at the December 2023 highs.

Of course, there’s always an exception…

Check out the US 30-year T-bond futures:

Like the following charts, we can measure our risk at a key pivot low from late February.

This is the video recording of the May 2024 Mid-month Conference Call.

How's this messy market treating you?

Are you happy the market is a mess? Or do you find it frustrating?

Keep in mind, the S&P500 is still at the same price it was 2 months ago.

Both the Nasdaq100 and Dow Jones Industrial Average are still at the same prices they were back in February.

We're almost half way through May.

The Technology Index, which is the largest component of the S&P500 (30%) and has the largest weighting in the Nasdaq100 (50%), is still where it was back in January.

Again we're half way through May!

Meanwhile, don't forget about the Small-cap Russell2000 that's hilariously still stuck below where it was way back in December.

The Consumer Discretionary Index and Dow Jones Transportation Average are also down for the year.

That's the market we're in.

Some people keep pretending that this year is just like last year.

But I cheated. I actually looked at the data. So I know better.

From the Desk of Steve Strazza @Sstrazza

We held our May Monthly Strategy Session earlier in the week. Premium Members can access and rewatch it here.

Non-members can get a quick recap of the call simply by reading this post each month.

By focusing on long-term, monthly charts, the idea is to take a step back and put things into the context of their structural trends.

This is easily one of our most valuable exercises as it forces us to put aside the day-to-day noise and simply examine markets from a “big-picture” point of view.

With that as our backdrop, let’s dive right in and discuss three of the most important charts and/or themes from this month’s call.

From the Desk of Ian Culley @IanCulley

So far, the dollar-yen is playing its part with a little help from Tokyo.

Falling dollar, falling rates, falling dollar-yen…

That’s the mantra reverberating throughout the market. 

But will interest rates get on board?

Check out the US 10-year yield climbing within a four-month channel: 

The 10-year is reacting to the channel’s upper boundary after stalling 25 basis points short of its October 2023 peak. 

Those former highs and rising trading range mark a logical area to witness a near-term pullback.

Imagine being one of these people who are lying to US citizens about falling interest rates?

Or worse, imagine being one of the poor victims who actually believed them?

Ouch.

The people lying to you include journalists across old media, a few economists that are somehow still employed, and even the President of the United States of America.

Or maybe the Biden didn't actually lie to you. It could have been the intern, who tells him what to say, that is the one behind the false information.

Either way, none of these people are here to help you. They're only here to help themselves. That's how this works.

So as investors, it's important for us to actually look to see what's happening, instead of blindly trusting some random source, even if that includes the President of the United States, who's been lying to you about falling interest rates all year.

Is the fact that he is up for reelection later this year further incentivizing these lies?

Probably.

You're finally seeing some of that defensive rotation with Utilities representing the only sector that is hitting new 6-month highs this week.

Here is a chart of Utilities relative to the S&P500, overlaid with Staples relative to S&Ps as well.

As you can see, both of these lines had been falling since 2022, because it's been a bull market.

But now that stocks have been correcting this year, you're seeing that outperformance coming from the most defensive sectors:

From the Desk of Ian Culley @IanCulley

Goldielocks’s soft landing is proving sticky.

Commodities are outperforming stocks and bonds. Interest rates are rising worldwide, and investors are anticipating increased inflationary pressures—not multiple rate cuts—this year.

In fact, inflation expectations are reaching levels not seen since June 2022…

Check out the Treasury Inflation-Protected Securities ETF $TIP vs. the nominal US Treasury Bond ETF $IEF ratio zoomed out twenty years:

Monster base. But I don’t think of this ratio in those terms. Instead, I use it to gauge investors’ desire for inflation protection. 

From the Desk of Ian Culley @IanCulley

Failed breakouts and trading ranges dominate the charts.

It’s a mixed-up, messy market environment wherever you look — bonds, stocks, commodities, forex…

US treasuries are a prime example, playing it cool with muted volatility and tight credit spreads while yields climb.

Perhaps the near-term rise in rates makes it difficult to grasp, but the US benchmark yield is actually chopping within a broader corrective phase.

Before we dive into the charts, I want to make two things clear: 

One, I am not an Elliottician or an Elliott Wave specialist on any level. And two, if you give five Elliotticians the same chart, you’re likely to get five different wave counts.

Nevertheless, my journey to earning the CMT designation exposed me to the Elliott Theory, and I find it prudent when examining the US 10-year yield.

So here we go…

Gold is one of the biggest winners so far in 2024.

But you can argue that it's really the commodities complex that is leading, and Gold is just one of them.

Check out the YTD returns here.

But the unwind in Gold stocks relative to other types of stocks looks to be just getting going.

Here is the Gold Bugs Index, which is loaded with all the top mining stocks, compared to the S&P500.

Notice the dramatic underperformance for so long, followed by a failed breakdown, and now the squeeze is just getting started: