The expectations of global growth and higher rates is a key theme carrying the markets into the end of 2020. It's hard to ignore when so many areas of the market support this thesis.
Global equities have been on an absolute tear. Many have been hitting new all-time highs over the past month. The Nifty 50, the Kospi 200, the Taiwan Stock Exchange, the New Zealand NZX 50, the MOEX Russian Index, the OMX Stockholm Index...the list goes on.
The point is that the demand for equities has been a global phenomenon, not just a domestic one here in the US.
Commodities have been implying growth as well. Copper recently broke out of a six year base. Crude Oil has been catching a bid over the past few weeks. Industrial and material stocks like Rare Earth Metals, $REMX, have been ripping higher.
Yet, Treasury Bonds continue to hold above major support levels.
With all this information out there, I think we can distill this theme into one very simple chart. The Commodity/Bond Ratio.
This is the one chart I want to have on top of the deck. How this chart responds to current levels will be very telling of the market environment ahead.
If the line continues to slope upwards, and holds above former support, then we are most likely in an environment where bonds are selling off, rates are rising, and money is flowing into commodities and stocks around the globe. On the other hand, a downward sloping line would indicate relative strength in Bonds and would call the entire thesis into question.
I'm leaning towards the former, and it appears most of the market is too, but we always need to look for clues that prove our thesis wrong.
Thanks for reading! Let me know what you think! Feel free to contact me at ianculley@culleycharts.com
DISCLAIMER: All information and opinions expressed by Culley Charts are strictly that, and should not be construed as investment advice. Market participation comes with inherent risk, and the responsibility of managing this risk lies solely with each individual investor.
Comments