Junk Is In

I just spent a good hour catching up on my BAA-TYX spread chart, which I hadn’t touched since Christmas. The new picture that unfolded, I hate to say, is less than encouraging for us bears:

After hovering around the 2.0% mark for about a month it’s now plummeted to 1.6% – a reading not seen since the heights of cycle wave b (a long term corrective wave of this bearish Supercycle and often misconstrued as a bull market).

Considering the fact that the CCI is in the crapper and that unemployment remains above 10% (U3 – U6 is beryond 17%) I can’t believe what I’m seeing – even at my advanced level of cynicism. If Primary wave {3} is supposedly ‘right around the corner’ – frankly I don’t feel very compelled to bet against the trend at this time. Unless I see the treasury-junk spread creep back above 2% I am very hesitant to short this market – except for quick trades like the one I twittered Monday afternoon.

Too many bears have been wiped out trying to pick the height of this insanity – I will continue in my trading hibernation mode until I see clear signs of a reversal in the making. Until we see a clear trendline break the wave count can be continued into oblivion – and I personally don’t enjoy wasting my time on academic exercises that only lead to trading losses. Stay delta neutral my intrepid stainless steel rats – it will happen, but not today.

Cheers,

Mole