The positive run from early June is getting ragged, but it is still intact thanks to the bounce
off the 25 day m/a today. The SPX is not overbought on price momentum in the short run
but is a little overbought on the 40 day RSI and my extended MACD, which as you'll see,
is shaky. SPX Chart
I have also included the 30 yr. Treasury price in the bottom panel of the above link. The SPX
has generated a much better relative return so far this year, but has been smoked by the 30 yr
when you take year end 2010 as a base. You will note how strongly the 30 yr has performed
over the past 18 months even as the economy has continued to expand. I regard the 30 yr as
way overpriced for the true longer term, and have no plans to look at a long side trade until the
bond gets down below 135 (3.50% YTM). There is a large slug of potential equities money in
the Treasury market, but players remain quite cautious on the durability of the US recovery. You
can see that in how well the bond has held up as well as in the continuation of wide credit
quality spreads within the conventional investment grade bond sector and also with ongoing p/e
multiple suppression for the SPX.
- Peter Richardson
- Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!