Let's take a took at some weekly charts.
Stocks have been soaring as seen here on the SPY(S&P 500):
Treasuries have remained relatively flat despite a large rise today. Here is the TNX(10 year) and its sharp drop in yields:
These are the big 4 that I follow each day, and I think the price action here over the past week is very interesting.
My first question is why are flight to safety assets performing so well after such a huge move in equities?
Bonds should be selling off hard as stocks rise and yet yields have stayed relatively flat. There was a strong BTC of about 2.9 on a 30 year bond auction today which is why yields dropped so sharply today.
This leads me to my second question: Why did a 30 year bond auction see such huge demand with a yield of only 4.2%? This is telling you the bond market is not worried about inflation. In fact, if anything, this is a signal that the market is scared to death about deflation.
This leads to my next question. Why is gold soaring in price if the bond market is worried about deflation? Gold typically trades higher when inflation fears are present although this is disputed by some economists.
My next question. Why is the market acting so afraid as stocks soar to new highs? Strong inflows into bonds and gold are fear indicators. Could there be a lack of confidence among the bulls regarding this recent rally?
Finally, my last question.
How far does the dollar have to freefall before the stock market takes notice? Folks, this crashing dollar is extremely worrisome for me. A strong economy is almost always is accompanied with a strong currency.
There will come a time when the dropping dollar turns into a serious headwind for the bulls. At what level? Who knows the way this wacky market is trading.
What I do know is energy prices are creeping up along with other commodity prices as the dollar drops. Meanwhile, here in the US, wages are flat and we are losing jobs by the hundreds of thousands each month.
This has the potential to stop the consumer dead in its tracks. Just go back to the days of $147 oil if you need to refresh your memory.
The Bottom Line:
None of these correlations add up folks. The market is trading like it has 5 different personalities. You might as well just call it Sybil these days.
Today alone: Sybil acted bullish, feared deflation, feared inflation, and traded the US currency like its not worth the paper its printed on(which it probably isn't).
Sybil's price action is extremely unstable and inconsistent folks.
This should concern all investors regardless if you are bullish or bearish.