NFTRH; Risk Profile

We have a developing potential for a stock market upside blow off on the table for reasons explained previously.  With this update I want to present the indicators that argue to the contrary and ask us to manage risk.  I cannot predict which way the chips will fall (no pun intended) but I can continue to put up indicators for guidance.

Junk vs. Investment Grade bonds are dropping in a bearish divergence to an over bought, over loved stock market entering a time window that ‘everyone knows’ is bullish.

hyg.lqd

Junk vs. long-term T bonds is doing the same.

hyg.tlt

TLT vs. SPY (top) is bouncing and nominal TLT (bottom) is rising higher still.  TLT-SPY, if it continues upward would be a risk ‘OFF’ indicator.

tlt.spy

Gold-Silver ratio (top), which has not worked reliably as a risk ‘OFF’ indicator in the US (it has worked better globally) and USD (UUP, bottom) are rising as well, but not at new highs.  These pressure commodities and precious metals, if not the stock market at this time.

gld.slv.uup

Bottom Line

The indicators are what they are.  Such indicators when viewed along with an over bullish stock market are negative.

For my own purposes, not being appreciably in the market to begin with, I am going to step further aside until things become clearer.  Intel has a target of 40, which is now only 2.50 away.  SOX is only 65 points below its measured target of 750.

It is in the realm of possibility that markets could continue upward and blow out into Santa, while negative indicators (and potentially, negative economic fundamentals) continue to gather.  It feels like playing the stock market now is like playing a casino, which I do not do.  If you are going with the seasonals and momentum, simply use the above as a balancing frame of reference.