The russel 2000 ^RUT is my bellweather for the upcoming bear market. There is always an upcoming bear market  we just don't know when it will happen.  Also oil sector stocks were strong indicating demand is intact for energy; At least some countries somewhere are growing and as long as they do, so will our stock market since our companies our international in scope and sell more to outside the US than inside the US. 

So today was bullish day, Tomorrow may not be.  It depends on whether war in the Ukraine is bullish or bearish.  Well war will be bullish for oil

the small cap Russel $rut on the stockcharts.com website, lost 1.6% and went back below the 200 day moving average today and the whole chart looks like a top, but it may be a continuation pattern forming for the next few months.   My analysis of flows of money into the economy, based on a modeling money flows and loosely based on an interesting paper that was done in the late 1990's by a former Fed official, still tells me that we are in an overall bull market.  But the decline of the 30 year yield, found as $tyx on the stockcharts.com website, indicates a short term correction is approaching.

 

L10 wrote:

Well I'm tracking the Russel 2000 index is at 1100 right now, 10% below it's peak and just below the 200 DMA; support is every 50 points down at 1050, 1000, 950. So I guess major index funds watch these support lines too for the sector. Anyway, this correction could be just a continuation pattern that will resemble what the Russle 2000 did between Arpil to Nov of 2012.  But it may turn worse, into a real correction like what happened in April 2011 wh the index lost 25%. In that case we have another 15% to go down.  

In 2011, XLE also corrected 25% so energy can go down in price if demand falls faster than supply and a falling 30 year treasury curve ^tyx is a sign of falling demand for loans and hence a sign of falling growth and therefore falling demand. . 
    

which brings me to my point that the overall demand (for real goods, such as gold) will rise will end when Dr.Yellin restarts QE  which isn't likely or until foreign T bond holders dump their bonds and get dollars supplied by the FED. The FED has to buy these bonds with newly created dollars or or interest rates rise and the economy slows.  These foreigners immediately dump their newly created US dollars for the remnibi, rubles, ..etc,.  As those dollars come back her to buy stuff, that will cause a 1970's style inflation.  The same thing happened when the Vietnam war was winding down; the US contracted in it's foreign policy to deal with the inflation and upheaval caused by Vietnam, while during that time Russia and China expanded their activities globally.  At that time, gold and oil will be a good investment, especially gold.
 

Last edited by L10 (5/16/2014 12:20 am)

L10 wrote:

this is my first post on macroeconomics.  I follow the treasury yield curve to determine if a bull or bear market is approaching and right now, based on my indicators a bear market is coming.  Unless the FED relents and stops decreasing QE.  The only thing keeping the economy alive is monetary injections, othewiise the deflationary depression resumes.

 
L10,
The "yield curve" commonly refers to the shape of the line where yields are plotted against the time to maturity.  The "typical" yield curve has higher yields for longer maturities; the current yield curve is very "typical" as 2 year Treasuries yield 0.37%, 5 years yield 1.55%, 10 years yield 2.47%, and 30 years yield 3.33%--yields to maturity rise as maturities lengthen.  I don't look at this every day, but it has been a long long time (probably 2008 or 2009) since we had an inverted yield curve, where short maturity bonds had higher yields to maturity than long term bonds.  An inverted yield curve often signals an impending recession--and recessions, in turn, usually trigger bear markets.  However, We can get bear markets without recessions. What in the yield curve did you see that alarmed you?

Looking at the spread may be useful, but I am only aware of the inversion (when the spread goes negative) as being really meaningful.
With the dollar as the world's reserve currency, demand may be influenced by other events.  Some observers believe that the Ukrainian upheaval has led to increased demand for Treasuries as a safe haven, and you rightly point out that short term rates can't really go much lower, so even a small marginal increase in demand for longer dated Treasuries could drive yields lower as long as the situation in the Ukraine remains somewhat unstable.
Then again, the Q1 GDP seemed pretty weak.

Good one

Under the new P.N.M Government, Faris AL-Rawi, may quite possibly be the new Attorney General of Trinidad and Tobago