Risk Taking Indicators Are All Good to Go

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Includes: CEW, DBB, DBC, EEM, GWX, HYG, PCY, TBT, UDN, VTI
by: Daily Trading

Mulit week highs are everywhere. Junk grade and emerging market bonds, equity markets and their internals are all telling the same story.

Then we look over at industrial commodities and emerging market currencies. What do we see there? We see the same thing that we've been seeing for a few months now as show in one of our earlier articles "Risk indicators remain absolutely bullish". This raised a few eyebrows at the time, but our reasoning has been proven correct.

In conjunction, the USD index and US Treasuries are having difficulties holding onto support levels. We believe that this will continue to exert significant upward force upon the price of risky assets, and can see no signs of the pressure abating over the next few months.

Perhaps the banking sector is the only bearish sign that we can see. Witness KBE drifting over the last few months.

Equities

Global small caps, the emerging markets, and the broad US markets continue to confirm equity strength. We see the NYSE advance decline line as particularly comforting.

Fixed Income

We are confident enough to make a call that it is only a matter of days before US Treasuries break to a multi-week low.

Commodities

We are looking for CRB and DBC to move higher and believe that it's is only a matter of time before the CRB closes at a multi-week high.

Currencies

Witness emerging market currencies vs. the USD. Grizzled old traders that we are, we have learned to listen to messages being sent by capital flows, particularly those from emerging market currencies. We place some importance upon CEW, BZF, AUD and SZR. They are speaking very loudly now. We have heard.

Watch the USD. Continued downward pressure should be seen as a buy signal for "risky" assets. We have advised our subscribers of our preferred trading positions and weightings.

Disclosure: Long VTI, EEM, GWX, HYG, PCY, UDN, CEW, TBT, DBC, DBB