We've been watching commodities and Treasuries closely for confirmation of the strength we've been seeing in stocks since the beginning of the year. Commodities have not been confirming the move in stocks and neither have Treasuries. But Treasuries, in my opinion, are getting close.
We'll be taking another look at the Treasury market today with a focus on the inter-market relationships which have been driving these markets for the past few years.
The intermarket relationships that predominate are:
The three panels below the price chart show correlations between TLT and the S&P 500, the Goldman Sachs Industrial Commodity Index and Gold. For the most part these correlations are consistent with our inter market relationships but I've highlighted the tension that's building with the S&P correlation. This tension has to be resolved. Either Treasuries will resume their uptrend and stocks will weaken or the rally in stocks will continue and Treasuries will breakdown out of the consolidation triangle (red arrow). And the MACD indicator is giving us a signal which way Treasuries are likely to go ...