Jordan Roy-Byrne: Well, hello, everyone. Welcome back to the Atlas Investor Podcast with Tiho Brkan. Thank you so much tuning in today for episode number 15. Tiho my friend, how are you doing, and what are we going to cover today?
Tiho Brkan: I'm very good. I hope you're also very good Jordan. Today, we'll be covering the stock market. We'll be looking at the three major regions, as we always do. So, United States stocks, international developed market stocks, excluding North America and emerging market stocks. And we'll be covering the price action, volatility, the breadth, the sentiment, the credit spreads in correlation to the stock market, and many, many other things. And, we'll be trying to figure out what comes next after seesawing up and down throughout first quarter of 2018.
Jordan Roy-Byrne: Okay, Tiho. So starting off here, let's talk about the US stock market. Obviously, we had the correction, which you predicted. It came down, it retested the low, it bounced. But it seems like since then, we haven't been doing much. But let me get your opinion on it. What's been going on with the price action in your view?
Tiho Brkan: Yeah, so 2017 was a terrific year. So, naturally, with such low volatility, and such wonderful gains, the market's not going to make it easy for us all the time. And, there won't be two easy years in a row. So, obviously, 2018 is not for the faint-hearted. I mean, the average true range of the volatility within the stock market is the highest since 2009 or since the end of the great bear market.
So, obviously, it's a difficult situation. When I talk to my clients, and when I made some certain trades and recommendations (we made some attempts to buy the lows on 12th of February, and also at the end of March, and early April. Both of them saw a decent rebound), but one of the things that we will be discussing here is the fact that stocks just cannot gain any traction. It doesn't mean it's bearish. And, there are plenty of reasons to be bullish, as we will discuss as well. So, it's a balanced approach that I'm looking at.
But having said that, for the majority of 2017, Jordan, stocks were sitting above the three-month moving average, and the drawdowns were very small. The volatility and price movements were also very small. For the majority of 2018, the price is trading below the three-month moving average and the volatility's very high. And, the drawdowns constantly remain 5% or more.
Jordan Roy-Byrne: Okay Tiho, so how would you characterize the recent volatility. I mean, we had the spike. It's leveled off somewhat. Give me your thoughts on that, and what you expect for volatility over the next couple months.
Tiho Brkan: Well, we have a fight between the bulls and the bears. We have a fight between buyers and sellers since 26th and 27th of January, 2018. That was the peak and the blow-off top. So, basically, the downside protection of support - we have a rising uptrend line, and we also have the 200-day moving average, depending on what somebody uses, it's up to you. That's holding the prices from falling further than the 10% draw that we have had.
At the same time, we have a declining trend line. And, this is where the sellers continue … They're more and more eager to sell. Every time a rally rebounds, and we have these relief rallies along the way, they are rebounding less and less. The sellers are more and more eager to fade the rallies.
Obviously, we had a big volatility spike, equivalent to 2015 on the Vix. But as I just mentioned, the average true range is much higher than at any time since 2009. Volatility has calmed down, to a degree. It was very, very high in February. But we are not falling back to those levels that we got used to, especially trading below 10, which were reflecting the boring market, the constant uptrend.
So, volatility continues to remain elevated, even though it's calmed down from the big spike that we had in February. But this ongoing fight between bulls and bears is coiling towards the decision point. So, we're getting closer to the climax. And soon, the stock markets will be telling us in which the directions they want to move. Not too far to go now, Jordan. I mean, we're getting to the end of the apex of the triangle.
Jordan Roy-Byrne: Okay Tiho, so as far as which direction it's going to move, most people, they believe breadth is a good leading indicator. I'm sure you believe the same. I know you're watching breadth very carefully. And, you have a couple charts here that you have provided us. What are they showing? And, what are your takeaways on breadth, and what it may tell us is coming down the line?
Tiho Brkan: Sure. Well, we have 12 charts to get through in this podcast. So, I could've brought about seven or eight breadth charts with me, but I decided to bring a bearish one and a bullish one. The bearish one we'll discuss first.
In my opinion, and from what I've studied historically, we haven't had a breadth thrust. Now, breadth thrusts are kind of looked at in different ways, depending on who is analyzing the market. Certain people would say breadth thrusts are connected to up and down the volume, on the New York Stock Exchange. And, once you have very high volume, on the upside, it indicates that huge amount of money is coming to the market, and pushing just about all securities in one direction. That eagerness usually creates a liftoff.
For me and what I personally like to use is the percentage of S&P 500 stocks that trade above the 50-day moving average. While no indicator is perfect, I've noticed with this indicator, in particular, the last 10 years, that whenever we have a movement of 90% or more of the S&P components trade above their 50-day moving average, after a major selloff or a correction, that's usually a breadth thrust. Just about the whole market shifts in one direction, and we start a rally. That rally can be sustained for a few weeks, to a few months, generally. Or sometimes even for a couple of years, as when we saw it in 2013. But generally speaking, that's what we're looking for.
Whenever we had moves that were less than 90%, so maybe 80, or 70 or 60% of the market rebounds, those are relief rallies, and those end up being dead cat bounces. Or eventually, they fizzle out with not too much further gains. That's something we commonly saw throughout 2008. And, also something that we saw just prior to the August crash in 2011 and something that we also saw prior to a 10% sharp selloff in 2012. And, also something that we saw after a very strong rebound at the end of 2014. That rebound only registered about 85% of components moving to the upside. And, from late 2014 until May 2015, the S&P wasn't able to move higher. The breadth was sinking.
Eventually, we had a Chinese devaluation in August 2015, and a sharp fall. Afterward, S&P rebounded rather sharply, almost made a new record on the total return basis. But the percentage of components was just above 80%. So, the breadth, once again, didn't do a breadth thrust. So, once again, we went down as oil bottomed in January and February of 2016. The start of 2016 was a bad one, and it dragged US stocks and many other stock regions around the world down. And, it wasn't until March and April of 2016 when we saw a breadth thrust, that the recent rally really got underway.
Currently, despite the fact that we become oversold in February, as well as in early April, we haven't seen a meaningful move to the upside, Jordan. The breadth hasn't gotten above 60%. So, these attempts to rally have been rather weak, and there is no major interest from the buying side of the market, from the bulls, to really indicate that the correction is behind us. Now, maybe it's coming. I'm not necessarily bearish. But I'm just indicating that this is a bit of a red flag.
Jordan Roy-Byrne: Yeah, and Tiho, I just want a quick comment on buying and selling pressure here. There's a chart that those following on theatlasinvestor.com, and on our YouTube channel, can see. And that looks like it's gone fairly deep into negative territory. And do you interpret that as more of a warning signal or more of a sign that the market just got really oversold?
Tiho Brkan: Well, all or nothing days, as well call them, or distribution and accumulation days where we have 80% of breadth as well as 80% of volume, I put them together in this chart, move towards either the upside or downside. That is a very good indicator. But as you'll notice, the tick rule on the New York Stock Exchange was removed in 2007. And since then, the volatility and the swings in breadth have been a lot more meaningful.
So, it's difficult to say how to interpret this indicator, because it can be interpreted many ways. One of the ways you can definitely look at it is whenever you have an overwhelming amount of distribution days, that creates an oversold condition, and you usually tend to have a rebound from that. But that doesn't mean that that rebound will last and create a new bull trend. As we saw in the middle of 2017, we had a large increase in distribution days, relative to anything that we saw for several years before that, and that was the start of immense selling pressure. Usually, it can either kick off a downtrend, or it can be seen at the end of a downtrend, like it was in October 2011, when we had a decent amount of distribution days relative to accumulation days, and then marked the end of the selling.
So, no indicator should be looked at on its own, Jordan. We should put them all together, and we have to start at general conditions. I think one of the greatest traders in the world, Jesse Livermore, and the great book written about him, the Reminiscences of a Stock Operator, he always used to mention that you look at many, many different things. And then, you have to start at the general conditions. And currently, the economy is not showing any signs of major slowdowns, or anything remotely close to getting to a recession.
Now, that doesn't mean it won't do that in six or nine months from now. But for the time being, stocks look like they're correcting in a healthy manner. And maybe there is a little bit more correcting left. But having said that, this could either be interpreted as the start of the selling pressure or the end of the correction. It remains to be seen. We have to put it with other indicators, some of which we are about to discuss in the following few questions.
Jordan Roy-Byrne: Yes, absolutely. Nice transition for me there, getting into sentiment because that's another indicator. And, sentiment is something I know you really enjoy building those charts and watching those indicators. What are sentiments surveys telling you about the market right now?
Tiho Brkan: Well, there's a variety of them. And, we can go through them one by one. It'll make the podcast drag on for an extra 20 minutes, and it'll maybe bore the living crap out of everybody, so I don't want to do that. I'd rather put it all together. And, instead of me doing it, the great people over at sentimenTrader, in particular, Jason, who does good work, he has a great indicator which is the advisor and investor sentiment model. And, I have the chart here showing the last two decades. The two standard deviations, negative below the mean. In other words, when the sentiment drops into a ridiculously low bearish territory, relative to where it was, let's say three to six months ago, the way that it compiles the indicator I'm sure, that's about 10% or below single digits. And we just had that.
So, over the last decade in particular, whenever sentiment dropped to single digits, and the economy continued to expand as it has over the last nine years, that was a buying opportunity. So that happened during the Flash Crash in May to July 2010. And in July, the sentiment indicator signaled a buying opportunity. And then, the same thing happened once again in August 2011, during the Eurozone debt crisis. And, the debt ceiling saga that was going on in the U.S. Congress, that was a buying opportunity. And then, we had the Chinese devaluation and the oil bottom, in August 2015, and January to February of 2016. Those were single-digit readings, and those were great buying opportunities too. And we just got one last week, Jordan.
So, it remains to be seen whether this one is going to give us the same results as the previous ones during this bull market. One thing that I want to note is that, during 2007 to 2009, sentiment would drop to ridiculously low levels as well. But when the downtrend is in full force, all that sentiment can really indicate is just a really oversold condition to the point where we will have some kind of relief rally. But it didn't stop the bears continuously pushing prices lower, and lower, lower, until we finally got to some kind of decent valuation, relative to where we were.
So, sentiment together with breadth, price, volatility, trending, momentum, together with valuations and general conditions, we have to put it all together. So, sentiment is decently negative here. So, now, we have to look at price action and whether it's going to confirm. And whether it's going to use this negative sentiment as the fuel, as a wall of worry to rally further. If it doesn't, it usually indicates there's something wrong. So, I'm on full alert right now, watching very closely.
Jordan Roy-Byrne: Okay. And I'll just add something for the listeners because I think this is important. It's something I learned from you, how sentiment has to be viewed in the context of the overall trend. And sometimes I think, at least in my past as an analyst, and others, sometimes they forget that when they're only looking at sentiment. They just assume that if sentiment is really extreme, there's going to be a big move in the other direction.
Tiho Brkan: Very, very important. And perfectly stated by the way. You know, if we're in a bull trend, you ought to be buying negative sentiment. Or at least, sentiment that gets decently negative, like we saw during 2012, all the way to 2015. Those were all bought the dip opportunities.
But when we're in a downtrend, as we saw from 2000 to 2002, whenever sentiment rebounds about 50%, you gotta sell the rip. You know, it's totally the opposite mentality in the 2000 to 2003 bear market, then it was, let's say from 2012 until 2015, bull trend when we remained a large number of days above the 200-day moving average.
Any time we had a bit of a shakeout, it was a buying opportunity. So yes, price and trend are first, and then other indicators, including the sentiment are second.
Jordan Roy-Byrne: Okay now, thank you for that, Tiho. Now moving on, let's talk about credit spreads. Because junk bonds are something I noticed following your work and your great charts. Junk bonds have rallied pretty nicely despite the correction in the market, and credit spreads have stopped widening.
Tiho Brkan: Yes, that's true. We have rising interest rate environment. So all fixed income is under pressure. If you have a look at the short end of the curve in treasury market, it's falling. If you have a look at the intermediate as well as the longer end of the curve they're also correcting substantially. Some of them are down now, for the fourth week in a row, as we record this podcast.
At the same time, corporate spreads, investment grade, government bonds, they're not doing that well. Emerging market debt priced in US dollars is not doing that well. Priced in foreign currencies and local emerging market currencies have been doing well until the recent US dollar rally. And that's now started to kick off. That's something we will probably cover in the next couple of podcasts. That's putting pressure on that side of the fixed income market.
And then, finally, junk grade is actually outperforming Treasuries. So, it's declining on an equivalent maturity, but treasuries are declining more and junk bonds are declining less. So, the credit spreads remain decently narrow. And to me, that indicates that there isn't major stress under the hood of the market, so to speak, in that metaphor. There isn't anything serious, at least from the credit investors that are telling us we should be worrying about.
So, maybe this isn't just a price correction or valuation reversion in some ways. And, maybe it runs for a little bit longer until we reset some of the other indicators as well. But, generally speaking, the most important thing here is that it doesn't seem like we are having a major sickness in the body of the financial market. It might just be a little flu, or a cold, that we're catching.
Jordan Roy-Byrne: Okay. I want to get your final thoughts here on US equities. But before we do that, first let's cover international stock markets.
Tiho Brkan: Sure.
Jordan Roy-Byrne: Okay Tiho, so now you're going to cover international stock markets, including emerging markets. Let's start off focusing on foreign developed markets. How have they been performing in recent weeks, in both nominal and relative terms, compared to the US?
Tiho Brkan: So, in the recent podcast that we covered the stock market (which was a couple of episodes before the Indonesian one), we were discussing that this market, in particular, this region was lagging. And, Europe and Japan, predominately here, were underperforming. This has changed recently. This was the only major region that undercut its February lows. Emerging markets and S&P 500 US equities did not. So, we were underperforming here quite substantially, but now, we really caught up.
We just had a straight rally in April. Quite impressive. I mean, if you look at the one component of this overall region, for example, is the Singapore equity market. If you look at MSCI Singapore, just recently, it came very close to making all time new highs above the January 26 peak. So, there are some markets in the world that are doing pretty well.
Having said that, generally speaking, you can see when you put them all together, (especially the major ones, with the largest market caps), we are failing to exceed the rebounds of February 2018. So look, we're barely trading above the three-month moving average, and we seem to be reversing once again. It remains to be seen whether we can hold this. But it's a very similar picture to the US equities, Jordan. The recent outperformance is not guaranteed to continue and especially if we see now weakness in the euro and the Japanese yen, relative to the US dollar. The US dollar usually, but not always, pressures foreign financial markets, a lot more than it pressures local markets.
Jordan Roy-Byrne: Right, and I know that we're going to have an episode focusing on currency developments, within the next couple weeks. But moving on Tiho, next let's talk about emerging markets. Because looking at the EEM ETF, it looks to me to be relatively weak.
Tiho Brkan: Well, you're allowed to use a worse word than that. I'll give you another try, Jordan.
Jordan Roy-Byrne: Well, that word I used a couple podcasts back, I think was shit.
Tiho Brkan: Yes, well, it looks pretty awful. I mean, honestly speaking, the rebound out of the February lows (the 9th or the 12th) was a very powerful rally. Emerging markets outperformed on that initial rebound.
I guess the rubber band stretched so much in early February that emerging markets were at one point down by almost 14% or so. And, the rubber band snapped back. So, that initial reflex rally was very powerful. But since then, we have failed to rally since late March and early April, when I was giving some recommendations to my clients to give it a crack to see whether the recent rebound had some legs. And, clearly, in emerging markets, it had no legs, it had no arms, it had no fingers or toes. So, it had nothing.
So, basically, if you bought it, you're probably under water already. And we have this coiling in a triangular pattern, which to me as a tape reader, looks ready to break down. It doesn't mean that emerging markets will now enter a catastrophic crash as a lot of the permabears may say. And you might remember them, back from 2015, they were predicting major crashes in emerging markets. They'll most likely stick their necks out again from their bear caves. And they'll come out and say how awful the sector is looking. And how China is going to crash. And Brazil's got problems. And Russia's got sanctions. And India's got a slowdown coming. And Africa is in a major problem. Usually, there's plenty of negative news, which we call the wall of worry. But if you look at the price action, there is definitely potential for this market to correct, maybe by another 5% to 10%. I mean, why not? They have had a meaningful and significant rally over the last two years and a couple of months. In some ways, I think over 70% or 80%, so why couldn't the market correct 20% after such a rip your face off rally? Right? So, it's only natural to have a mean reversion.
And this is the only market that still remains above its 200-day moving average. And unlike the US equities, and international developed markets, it never even came to touch it. So it's been trading above the 200-day moving average for a long time. So it looks like it wants to break down. It looks like it wants to mean revert back to the moving average that everybody follows, including us. And that's natural that it wants to do that because markets tend to mean revert to these moving averages from time to time. No trends last forever.
So, I'm expecting a little bit more of a pullback, but will that be a buying opportunity? Yes, I think so. It depends how far it goes. But valuations on a relative basis are still very attractive in emerging markets. And that's something that I've been discussing on my blog, on my podcast now, as well, and in other interviews, and with other clients, since late 2015. I've been a big fan of emerging markets, Jordan.
Jordan Roy-Byrne: Okay, Tiho, I know you covered a lot there. I just want to give you one last chance. Any final comments you have on foreign and emerging markets?
Tiho Brkan: We had leadership from emerging markets over the last two years. And they're now stalling. And that might be leading us to the downside. They just might be weak because the dollar is rebounding. It remains to be seen, but I think all markets have a chance to correct, especially international markets and emerging markets, if the dollar rebounds some more. And it remains to be seen how far this correction will run.
I mean, sentiment has moved down to very very low levels, as we've already discussed. And credit spreads are not really widening to let us know something dramatic is happening. But at the same time, every attempt to rally since the 9th of February and 12th of February low has not really been a major participation rally where a lot of the breadth of the index gets moving in one direction, the bullish direction. So, buying interest is not really dead, Jordan.
So, it's a bit of a mixed picture. And I'm watching it closely. I'm not very exposed at this moment in time. And, in particular, my favorite sector, the emerging market sector, is underperforming. So, I don't want to sit there and lose an unnecessary amount of money. I'd rather watch it correct, have a proper wash out, and then get back in when it's time to party.
Jordan Roy-Byrne: Okay Tiho, so normally when we cover global equities in these podcasts, we just focus on the big indices and not specific sectors. You wanted to focus on several sectors. The news of the trade war, or potential trade war, has impacted markets. Tell us what's going on as far as small caps and maybe if there is any new disparity between small caps and large caps.
Tiho Brkan: Sure. Well, small caps have been actually outperforming in recent weeks, since the correction started. And they are more so consolidating than correcting and trying to double bottom, as a lot of people have been recently saying. They're not really breaking below the 200-day moving average. And they didn't even experience a 10% correction. So, they held up much better. So, on a relative basis, small caps have outperformed large caps, Jordan. And it remains to be seen, though, if that can continue.
Whenever we enter a downtrend, and a downtrend will come eventually, once again, I'm not sure when. I'm pretty sure none of us are sure when, apart from the ones that are charlatans, and they pretend they can see things because well, because their crystal ball is working better than ours. But regardless of that, whenever the downtrend does come eventually, small caps will most likely, in my opinion anyways (a prediction, and take it as a grain of salt) but they will probably correct more than the large caps because the valuations in the sector are just that much higher than the valuations (that we covered many many times in these podcasts) in large caps and US equities, like S&P 500 and Dow Jones, and so forth.
So look, they're outperforming now. But I'm not very eager to go and chase and buy them, despite the fact that they might have some more upside. Valuations are just at nosebleed levels for me, Jordan. So you know, I'm staying away, regardless.
Jordan Roy-Byrne: Okay now, let's move on and talk about real estate investment trusts, also known as REITs. This is something we covered off and on in recent podcasts. I know we're gonna get into the bond market and interest rates, I believe in the next podcast. But give us your current insights on REITs.
Tiho Brkan: Yes, well, if the small caps are the ones that are doing better during the current trade war correction and the rising interest rate correction, then the opposite side of that is the REITs sector. And to some degree, utilities, which we are not discussing here. But REITs are the ones that are underperforming dramatically. They have corrected by over 16%, from peak to trough.
At one point in time, I was actually short this sector, but we've covered recently during the fall. The sentiment now, in the overall equity market is getting rather bearish. But yes, REITs have corrected, and the correction has been something that we've expected and something that we've seen since at least 2012.
So the taper tantrum produced about a 15% correction for REITs. And emerging markets slowed down, and Chinese stock market crashed, and the commodity bust also produced about a 15% correction. And then the initial rise in interest rates from July 2016 into early parts of 2017 that also produced about a 15% correction in REITs. They had a rebound but never made a new high, and it looked very weak, something that I was discussing for a majority of late 2017. And finally, that cracked with the stock market. And now, they've corrected by about 15% once again.
And they're failing to rally, Jordan. They're failing to rally because interest rates are knocking on the door of 3%. And the 10-year treasury is something that we will be discussing in the next podcast. We'll give a lot of attention to the overall fixed income market and why rate sensitive and interest rate proxy sectors such as REITs could continue to underperform some more, if rates continue to rise.
Jordan Roy-Byrne: Okay Tiho, now finally, I want to get your opinion on current valuations after this 10% correction we've had. Because looking on Twitter, the permabulls are saying, "The market is not longer overvalued. It's now fairly valued." And then, the permabears are of course saying, "Valuations are still very extreme." So give us the real deal on valuations now.
Tiho Brkan: Well, I'm not sure if there is a real deal, because it depends which camp you fall into. I don't like to fall into camps. I'm not a bull and a bear.
Recently, somebody contacted me on Twitter, and they said, "I'm pretty sure you are bullish on your call. And you're a bull." I don't do it like that. My job is to make money, not to be a bull or a bear. I'm not in it to analyze things and to be right. I'm just after the profit. So, I'll be a bull in an uptrend, and I'll be a bear in a downtrend. So, I don't really fall into any case here.
So, the permabulls will say that the forward price to earnings valuation has mean reverted back to somewhat of a cheap valuation. So, what we saw in 2016, or at least, not cheap, but fairly valued. You know, something attractive, as they would call it. Permabears will point to a numerous number of indicators, including the famous ones that been promoted such as US equity valuations relative to the GDP, and price to book valuations, which are really high, and also CAPE. And, I'm including CAPE here as well. So, if we are looking at one of the more followed indicators, which is the CAPE ratio, the current correction is absolutely meaningless.
By the way, if we're still in a bull market, valuations can continue to expand. Valuations are not a timing indicator. Valuations couldn't tell you that 2007 the top. They might have helped you in 2000, but one could have stated that by 1998, the market was so overvalued at a historical high, at a record high, that that was the top too. So valuations are not a timing indicator. So, in my opinion, the current correction has done nothing for both the bulls and the bears.
If we're still in a bull market and we continue to go higher, valuations can exceed the current peak. At the same time, if you were in a bear camp, and the currently 10% in price, if you were wondering whether it's done anything to reset valuations, it's totally meaningless. It has barely moved. We would need a 50% drop to make this market very attractive as far as a generational buying opportunity. Examples would be, let's say 2003, or 2009, or 1987, or 1974, or 1982, or even going further, like 1949. So, we need a meaningful drop.
I'm not predicting one, but I'm just saying valuation wise, we're still expensive, but we could get more expensive. But there are always a handful of conclusions that you can create from a single indicator. Switch around a few numbers. Make it a forward-looking and voila, magically you have something that looks a little bit cheaper than it is.
So, I'm a big skeptic of playing around too much with something. If it's not broken, don't fix it. Valuations are not used for timing, as I said. They're just used to indicate the strategy of buy and hold, or whether you should be cautious. And, cautious investors that have the right risk management in place, Jordan, they can still make plenty of money on both the bull and the bear side of the market. There's no reason to fall into just one camp.
Jordan Roy-Byrne: Okay Tiho, before we wrap up this podcast, I have a final two-part question for you. First, please share with us a conclusion to everything that you have discussed. And secondly, please give a preview of what you are going to discuss in episode number 16, in which we cover the bond market and interest rates.
Tiho Brkan: Okay, so regarding the stock market, we are coiling in into a fight between the buyers and the sellers. And we are approaching kind of a climax. The buyers haven't been that interested, and we haven't seen a breadth thrust in any way, any meaningful way that would tell us, as it previously has, that we have a major rally on the way.
At the same time, we've seen a huge number of distribution days, which tend to mark at least, a short to intermediate term bottom. Too much selling pressure, in other words. And the sentiment surveys themselves have dropped to levels equivalent to what we saw during the flash crash, the Eurozone crisis, and the China slowdown of 2015, 2016.
So, there are some positives, some negatives. And another positive is also credit spreads are not giving us any kind of warning signals that something major is around the corner. So, this is a typical fight, and tug of war between bulls and bears. And the price is acting very technical.
Emerging markets are the laggards out now, after leading for a couple of years. And, they're failing to rally in any meaningful way. If the US dollar rally gets underway, they could be in even more trouble.
Small caps continue to outperform some other REIT proxy sectors, such as real estate, and utilities. And in particular, small caps are doing better than large caps. They're not as affected during this trade war issues that are going on, in recent week.
Finally, valuations have not reset in any meaningful way to help the bulls or the bears. So, not a lot of change there. Ten percent is not a very significant move in the market after rallying for nine years in a row, without a down year. So, generally speaking, it's not the easiest market condition, as the average true range is the highest of the last few months since March 2009. It's very volatile out there. And I would advise any market participant to focus on protecting their capital and the return of that capital, instead of the return on the capital. 2017 was easy, and 2018, so far has proven to be difficult.
Regarding interest rates, Jordan, they continue to move on the upside. And I think what bears watching is the 30-year treasury, the long bond, which is now approaching 3.25%. And if that breaks, we could have a substantial move higher on the long end of the curve as well.
We'll be covering all things fixed income in episode 16. And I'm really looking forward to that, because it has been a while. There have been a lot of developments in the bond market, especially over the last two weeks, as the yields are starting to move up, yet again.