Five Charts to Rule Them All

This is the next installment in our "Five Charts to Rule Them All". We make our, rather good, living by forming an outlook, then trading that outlook. The weekly process that we describe here is one of the ways that we form our outlook. We try to ascertain if existing trends are likely to continue, or move sideways, or revert. Of course it's not an exact science, but must be done.

Today was a longer "coffee house" session than usual. We stayed on past coffee to lunch. Rack of Lamb with Honey Mustard Glaze.

Now, to matters at hand.

The reasons for the longer discussions were the multi-week highs in equity and commodity markets, accompanied by a low in the USD index. Fixed income and Real Estate are lagging somewhat, however our conclusion is that the recent bullish trends are in any danger of rolling over.

This puts us in completely the opposite path to Roubini and his ilk. If we had been trading that view over the last 12 months we could be down to our last hundred thousand by now. Of course in the long-term view it could be completely right, however any trader who has been around for a while would prefer to be "wrong" but profitable, rather than "right" but broke.

I think I've said a few times previously that there is so much fundamental and technical data available that most could make a credible argument for bullish or bearish sentiment at just about any time. Our approach is to look at high-level capital market market movements and form an outlook from that. To determine what to trade, that's when we dig much deeper.

A case in point. Here we present the Value Line Index [read more about it here if you like]. From this we takeaway that the upword momentum in equities is still very much in ascendence. Some down days are just part of normal trading patterns. And that is how we form a high level view of the equity markets.

Not very difficult.

So why don't you try it for yourself for the Bond markets. Is this trend likely to continue, reverse, or go sideway?

And Commodities.

And Real Estate.

Finally let's see to what depth the USD has plumbed this week!

We still see plenty of downside in the USD, and do not consider it oversold in any way. The downward trend still looks quite aggressive to us.

So that's our outlook. No change from last week; nor any sign of impending weakness. Which is rather nice, as every trader likes predictable trends. So that would be some more accumulation on our existing positions this week then.

Disclosure: Long VTI, TBT, GSG, UDN, IYR.