As bonds continue to surge and the dollar tries to rally, here is a look at what the Fear & Greed Index is saying as well as some other major highlights.

Here is what Peter Boockvar wrote as the world awaits the next round of monetary madness:  At least according to newsletter writers, sentiment on US stocks remains very bullish. Investors Intelligence said Bulls rose to 56.3, a 3 week high from 55.8 last week. Bears fell by .8 pts to 17.5, a 3 week low. The peak in Bulls in the post election time frame was back on March 1st when it touched 63.1 which was a 30 yr high. That day was also the peak close in the S&P 500. II refers to any read above 55 as the “danger zone” and that was first reached on November 23rd…


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KWN Faber I 2:19:2016


As of yesterday’s close, the Russell 2000 is back to where it was on December 8th, the Transportation index closed at a level first seen on December 6th, the S&P Midcap index is 1% above its December 8th close, the industrial stocks (XLI) are 2% above its December 7th close and the financials (XLF) are back to its early December close, to name a few. Tech is really the only standout with XLK up 9.5% since December 7th and in turn has helped the market cap weighted S&P 500 and NASDAQ. We are of course well above the November 8th close for all markets but the point I’m trying to make is when bullishness gets stretched, stocks usually are closer to the end of its short term move rather than the beginning. This could certainly be just a rest for another move higher but a cooling of bullishness would be a better backdrop for that. Fundamentally, I still believe that this is the time when valuations begin to matter because of the tightening of monetary policy.

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In contrast to the attitude of newsletter writers, the CNN fear & greed index closed yesterday at 31 which is in the ‘Fear’ category. This figure is calculated by looking at 7 indicators, momentum (market relative to its moving average), junk bond demand (spread b/w high yield and IG), stock price strength (52 week highs minus 52 week lows), put/call ratio, stock price breadth (McClellan Volume Summation Index), safe haven demand (difference b/w 20 day stock and bond returns), and the VIX. What to make of the discrepancies in market attitudes? I’m not exactly sure.

We start the trading day with the US 10 yr yield exactly at the lower band of its 5 month trading range as we all debate the mixed messages that all these markets are sending on growth. I want to emphasize my belief though that underlying the behavior on bonds is also the shifting behavior of QE programs which creates its own dynamic that can’t be analyzed by looking at just growth and inflation stats. Over the next year, Fed, ECB, BoE and subtle BoJ tapers are upon us and the end of negative interest rates will coincide or soon follow. That alone puts a floor on global rates I believe. As for the US 10 yr, even after a 1.6% growth performance in 2016 and a possible under 1% print in Q1, its yield is still almost 100 bps above the July 2016 lows and a lot has to do with the change in central bank action in addition to the rise in inflation expectations and hopes for Trumponomics.

In the midst of the spring selling season, the MBA said mortgage applications to buy a home rose 2.9% w/o/w and 2.8% y/o/y. That y/o/y move is the slowest since February but on an absolute basis is the best since June. Sellers are enjoying high prices. Buyers though are dealing with modest inventory, a persistent rise in prices that are running double the rate of inflation and mortgage rates that are about 50 bps above last year. Refi’s saw no change w/o/w and remain down 40% y/o/y even though the average 30 yr mortgage rate fell 6 bps to 4.28%, the lowest since mid January. I’m sure bank earnings reports will reflect the collapse in this area of their business. ***KWN has just released the remarkable audio interview with Michael Belkin, the man who counsels the biggest money on the planet, and you can listen to it by CLICKING HERE OR ON THE IMAGE BELOW.

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