NYSE margin debt declined by a little more than $10 billion in October. In 2012 and 2013, there were only three months that saw margin debt decline. So far in 2014, there have been four months. In 2011, there were six months with declining margin debt.
Read MoreLast week we noted that copper was at a critical level and further weakness could open the door to much lower prices in the months ahead. Well, that further weakness seems to be materializing today as copper drop is down almost $.05/lbs, or 1.6%.
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In case some of our readers aren’t familiar with the popular picture book/game series entitled Where’s Waldo, here’s a quick run down of how it works.
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While we are well aware of the relationship between the level of the JPY/USD and the Nikkei in yen terms (1st chart below), there is another less publicized relationship between Japanese stocks and the yen that suggests yen weakness isn’t all it’s cut out to be.
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As we have noted before, this market has been somewhat unique in that counter-cyclicals have outperformed cyclicals since the market top in October 2007. As you can see in the first chart below, counter-cyclicals have outperformed by nearly 18% over the past seven years.
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Today’s price action across all the major asset classes stands out as rather odd. Indeed, stocks are up pretty much everywhere around the world (US, Europe, Japan, China), bond prices are up (yields lower), commodities are higher (gold, energy, lumber, copper, CRB, some softs), and the USD is higher.
Read MoreAs most investors are aware, there have been some major currency moves recently (looking at you Yen/USD cross). This has established some interesting trends in the forex market. For example, volatility continues to rise off a very low base (unlike in the equity market).
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Regular readers know that we have been harping on the lack of volatility all year (few posts here and here) so it should come as no surprise that we are, once again, calling out the absolute evaporation of intraday volatility in US stocks.
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European cyclicals continue to be the weakest segment of developed global equity markets, and there doesn’t appear to be much sign of that changing. We refer to the extremely strong relationship between German 10 year bond yields and the relative performance of European cyclical sectors.
Read MoreSince the ”666” intraday low, high yield spreads and equity prices have basically moved in lockstep together. As equity prices moved higher, the spread between junk bonds and 10-year treasuries narrowed. As the chart below illustrates, this relationship started to diverge during the summer.
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In June, 86% of the energy stocks in the MSCI World Index had positive price performance year-to-date. Since that time, however, energy stocks have been clobbered. In mid-October, only 11% of energy stocks were higher YTD. This has marginally improved to 28% as of yesterday.
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As US stocks continue their march higher we’d like to remind readers of the market leadership in general and especially off of the October low. Stocks have staged a powerful rally, but the leadership has been and remains counter cyclical stocks and Knowledge Leaders, companies that successfully employ knowledge capital to achieve outsized returns.
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Today’s release of the ZEW financial market survey for Germany revealed a surprising increase in economic expectations, compared to the consensus for a marginal improvement: chart note: dark blue = balance red = improve light blue = no change black = worsen Meanwhile, the question on current economic conditions revealed no change from low levels
Read MoreAs we have noted many times before, a simple way of measuring momentum is by looking at the percentage of companies that have a 50-day moving average above its 200-day moving average. Robust bull moves tend to have a rising percentage of stocks where the 50-day moving average is higher than the 200-day moving average.
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There are only a few stock markets in the developed world that are extending to new one year highs, while there are many that are well below one year highs. Looked at in USD, the US, Sweden, Switzerland and Japan are at one year highs.
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