Midweek Update

The US Dollar is rising again pre-market. SPX looks like it may be due for a pullback, but the NDX and the Dow industrials and transports still show strength. Breadth indicators still look solid pretty much across the board.

Lately some analysts, myself included, have been considering whether the inverse Dollar/equities correlation may reverse. So far the early evidence is leaning  in that direction. Portfolio implications: continued bullishness for stocks, weakness for commodities.

This week’s much discussed negative yield TIPs auction appears to have confirmed the reversal in the bond market. Corporates have  joined Treasuries in the selloff as the market appears to be repositioning for inflationary expectations. The deflation thesis which has held sway for so long seems to be receding.

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