The Bulls are getting lost in the Narratives
The current runup in the market out of the March 2020 lows has gone through a series of explanatory narratives when really there have only been two primary factors, Powell’s Funny Money Fed and Biden’s hail Mary Covid/Infrastructure cash cascade. As reality approaches there seems to be a frantic struggle to justify the price / earnings ratios that have resulted. One problem that is developing is that as today’s U of M sentiment report shows, there is a real risk that we could see embedded inflation pushing up long term bond yields, while systemic deflation could be keeping pressure on short term yields. We are watching the 10 to 30 yr curve for confirmation.
At this point in the Bubble I am continuing to look at the evolving position of Long Dollar / short Stocks, short Bonds, Short Commodities, and short Gold which should benefit from the combination explanation outlined in the previous paragraph.
In the construction of this trade I am really looking at five markets and four relationships. At this early stage the primary position is the Long Dollar position that started last December basis the long term charts. Since then technicals have added two relationships Long Dollar / Short Bonds and Long Dollar / Short Gold. Two relationships are still waiting for technical confirmation, Long Dollar / Short Stocks and Long Dollar and Short Commodities.
Here is the overall chart as of noon today.
I may be taking off for another week starting this weekend.