The PerfChart below tells the story for the Dollar, Treasury bonds and commodities since late September. Note that stocks, the Dollar Index ($USD) and the 10-YR Treasury Yield ($TNX) are down, while the 10-yr Note ($UST), Spot Gold ($GOLD), Spot Crude ($WTIC) and Spot Copper ($COPPER) are down. It is a classic relationship at work: commodities suffer when the Dollar rises. Normally, bonds tend to rise when commodities decline because this is disinflationary. However, it looks like the bond market is making an adjustment to Fed policy, or rather perceived Fed policy because nobody really knows what the Fed will do in December.
For traders, this PerfChart highlights some underlying themes to keep in mind. First, the Dollar is rising and strong. Second, commodities are falling and weak. Third, bonds are also weak and falling. Fourth, stocks seem to like what is happening because the S&P 500 is up. Below is a screen shot from Intermarket Technical Analysis by John J. Murphy. It is a nice page to print out because it lists the eight key intermarket relationships. Thanks, John!
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Thanks for tuning in and have a good day!
--Arthur Hill CMT
Plan your Trade and Trade your Plan
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