I gave a 45-minute presentation on Yield Purchasing Power at American Institute for Economic Research in Great Barrington, MA on October 14, 2016. I am grateful to the Institute for recording video of my presentation plus extended Q&A.
The beaten-down Russell 2000 Small-Cap Index has reached a confluence of significant potential near-term support levels. Should this level fail to provide as much as a speed bump and the Russell 2000 slices right through it, then perhaps a more devastating market decline is already at hand.
Within the last week China appears to have hit the panic button with regards the seemingly unstoppable collapse of commodity prices. First, desperate Chinese producers began to demand a QE-for-commodities bailout; then, following the well-trodden (and failing) path of China's equity market maipulation, authorities began to crackdown on "malicious" commodity short-sellers. So why now? Why focus attention on the commodity markets? Perhaps this chart holds the key...
The blue chip Major Market Index failed to recapture a key breakdown level. Recently, amid the sharp post-September rally, the XMI returned to “kiss” the underside of the broken trendline. This was no happy reunion, however, as the result was a clear and precise rejection of price by the trendline.
With the US bond markets closed for Veterans' Day, it is time to take a breath and examine how far (and how fast) yields have moved in the last few weeks. With the entire curve bursting higher, we focus on the 10Y yield which will need to fight through critical resistance here if rates are to continue to rise.
Anecdotal evidence from press reports, survey data and positioning data all agree on one point:very few people believe that the recent rally could actually be for real. With a pullback underway, we now have a chance to judge its nature – this should soon tell us if the recent rally was just another fluke or if it retains the potential to become a more sustained advance.