Bonds Outside Norms Dating Back Over 500 Years

Includes: SPY, VOO, VTI
by: Chris Ciovacco


Very rare occurrences in the fixed income markets tell equity investors to remain flexible.

How concerning was last week's reversal in risk-on assets?

How can we monitor the confidence of a bullish push higher in stocks?

The stock market has seen various forms of extremely rare behavior over the past three years. The bond market has also checked some very, very rare boxes recently. From Bloomberg:

Today's bond market is defying just about every comparison known to man. Never before have traders paid so much to own trillions of dollars in debt and gotten so little in return. Jack Malvey, one of the most-respected figures in the bond market, went back as far as 1871 and couldn't find a time when global yields were even close to today's lows. Bill Gross went even further, tweeting that they're now the lowest in "500 years of recorded history." Lackluster global growth, negative interest rates and extraordinary buying from central banks have all kept government debt in demand, even as yields on more than $8 trillion of the bonds dip below zero.

Last Week's Intraweek Stock Reversal Muddies Bullish Waters

On Wednesday, June 8, the S&P 500 (NYSEARCA:VOO) was up 20 points for the trading week that began on Monday, June 6. By the time the closing bell came on Friday, June 10, the S&P had given back all its gains for the week, finishing the 5-day frame down 6 points. This week's video covers numerous markets that have yet to "prove it" from a bullish perspective.

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Odd Market Behavior Calls For Flexibility

The S&P 500 ETF (NYSEARCA:SPY) dropped sharply last week on well-above average volume. Even in that context, according to J. Lyons Fund Management, "smart money" commercial bond traders have placed the largest bearish bet in eighteen years on defensive bonds. Economic data has been mixed in recent weeks, adding to the need to remain open to the bullish and bearish case for equities. With a Fed statement coming Wednesday and numerous economic releases (PPI, industrial production, CPI, housing starts, etc.), the market will have plenty to assist with bullish and bearish choices.

The bullish case for stocks (NYSEARCA:VTI) would greatly improve with a sustainable and confident move above 2,134 on the S&P 500 Index. Confidence can be measured via ETF leadership, market breadth, and trading volume.

Disclosure: I am/we are long SPY.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.