When Junk Bond traders jump ship, I’m out of stocks.

With all the talk about credit spreads “blowing out” since early August, this is an important discussion to have right now.

We always trust the bond market. Throughout history, bonds have done an impeccable job at alerting investors about problems in risk asset markets. 

When there is stress in other markets, it shows up in fixed income first.

However, as technical analysts, we are mindful of the math that is behind some of the relationships we study and give weight to.

What if I told you that industrials have been massive underperformers during this bull market? 

The absolute price chart looks incredible. How could that be?

We call it the denominator fallacy. 

Benchmarked against the S&P 500 or Nasdaq 100, of course they are underperforming. 

We think there is a similar situation playing out for our bond market ratios right now.

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

The market hates it when bonds are making outsized moves.

It's less about when rates are rising or when rates are falling.

The bigger point here is that when interest rates are making very aggressive directional moves, that's what brings the volatility to the stock market.

And that's exactly what's happening:

This is the video recording of our August 1st Monthly Charts Live Strategy Session

This is where it all starts folks.

The story starts and ends with the Bond Market.

You may not like it. I know I certainly don't. But that's the world we've always lived in. And it's the world I would expect us to be in for a long long time.

The bond market is $130 Trillion. That's compared to a mere $50 Trillion US Stock Market. The total Global stock market is slightly over $100 Trillion, for perspective.

This is the video recording of our July 1st Monthly Charts Live Strategy Session

This chart really stood out to me this week.

We just saw the Australian Dollar vs the Japanese Yen close at the highest levels since 2007.

So why investors care about the Aussie/Yen cross?

Because look how it trades with commodities...

This is the video recording of our June 3rd Monthly Charts Live Strategy Session

Software is supposed to be one of the leaders of the Nasdaq.

But this time around, it's one of the groups trying to drag it down.

Look at the new highs this year in the Nasdaq, but Software continuing to put in a series of lower highs, and possibly its first lower low this week.

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....

Stock prices don't go straight up, even during bull markets.

Corrections are a normal phenomenon.

Messy market environments are perfectly normal too.

And that's exactly what we've seen.

To be clear, corrections and messy market environments for several months at a time do not change the fact that it's still a bull market.

We've been in a bull market for almost 2 years. That hasn't changed.

The bigger question is whether this bull market is now ready to resume? Or is more churning, sector rotation and further sentiment adjustment still necessary?

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