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Long Term Perspectives

Long Term Perspectives

by The MoleAugust 26, 2014

Equities are bubbling higher with the ES futures touching the 2k mark for the very first time (the cash did it yesterday). Since there’s not much to be said on the trading front this is a good time to run through a few long term perspectives. Now that another major milestone is in the bag the question once again returns to how long equities can keep this pace up!

2014-08-26_spoos_update

Let’s start with price and our volume profile on the E-Mini futures. If you ever entertained illusions of possessing any clairvoyance in regards to the market’s direction then think back to early August when we were in the midst of what looked like a correction with legs. Since that time we’ve seen one of the most profitable reversals of this bull market.

2014-08-26_PnF

Actually there was a very similar one earlier this year in February. Looking at the P&F the setup and ensuing resolution looks almost identical to the one last winter. What followed was quite a bit of sideways churn and plenty of guesswork which lasted all through June. It’s possible that we’ll be entering a high volatility sideways period in a few weeks from now, so enjoy the getting while it’s good. However, that said – I don’t think any correction (sideways or down) would drag out for months again as we usually see more directional tape in the last quarter.

2014-08-26_JNK_TLT

If you recall from a few weeks ago – I was getting quite nervous about the discrepancy between the JNK:TLT ratio and what we were seeing on the equities side. We did get our correction but what’s remarkable is that this chart hasn’t moved an inch while equities were driving higher.

2014-08-26_JNK_LQD

So what gives? Well, it’s a complicated story and quite frankly I’m not a bond expert. But part of the answer may lead back to this chart – a cross between JNK and LQD (investment grade corporate bonds). Seems like bond investors are piling back into corporate bonds and unless we see a significant divergence on this chart there is little standing in the way of this raging bull market. Which unfortunately most retail traders have completely missed out on.

More LT perspectives below the fold – please step into my lair:

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About The Author
The Mole
Mole created Evil Speculator amidst the chaos of the financial crisis in early August of 2008. His vision for Evil Speculator is a refuge of reason, hands-on trading knowledge, and inspiration for traders of all ages and stripes. You can follow him and his nefarious schemes at the usual social media waterholes.
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