The stock market was roughed up by the coronavirus earlier in the week, but, under the surface, another battle has been going on -- the one between inflation and deflation, that is, as both yields and commodity prices have run up against key support levels. That's a dispute that should concern most investors. It certainly concerns us at Pring Turner Capital and in my monthly newsletter, the Intermarket Review, as decisions are evolved as to whether to position accounts in an inflationary or deflationary direction.
Take the 5-year yield, for instance. Chart 1 shows that the trend is still negative, because it is below its 12-month MA and the long-term KST in the lower window is bearish. However, it is also resting on a 6-year up trend line, where it's possible that a reversal could take place.
Chart 2 shows how critical the near-term situation is, as the yield is also resting right on its 2018-2020 up trend line. Since the 9-day RSI is oversold at a time when the yield has reached support, this should trigger some form of a bounce. If it does not, that will be a definite technical negative.
Further down the yield curve, the 30-year series is close to its 2009-2020 support trend line. Long-term indicators remain very oversold, hinting that a primary trend reversal may be in the cards. However, the short-term series in this chart is in a bearish mode, which suggests that a challenge of that line is a distinct possibility.
Editor's Note: This is an excerpt of an article that was originally published in Martin Pring's Market Roundup on Wednesday, January 29th at 1:29pm ET. Click here to read the full article, which includes Charts 4-8 and a discussion of commodities.
Good luck and good charting,
Martin J. Pring
The views expressed in this article are those of the author and do not necessarily reflect the position or opinion of Pring Turner Capital Group of Walnut Creek or its affiliates.