Over the last year we transitioned from the stock market angst of 2015 to the bullish breakout of 2016.  For NFTRH, the real proof in the pudding was the ramp up in the cyclical Semiconductor sector’s Equipment sub-segment (AMAT, LRCX and the like).  Specifically, we tracked a trend in Equipment orders and projected a bullish Semi sector a year ago.  The logical extension of this was a bullish stock market, since the Semis are a leader.

What a difference a year makes.  Reference AMAT Chirps, B2B Ramps, Yellen Hawks and Gold’s Fundamentals Erode from last May.  Our best target for the SOX index was around 940 and late-arriving momentum players (and their ‘quant’ machines) have driven the index beyond reason of late, to a high of 1017 last month.  It is time for a cool down in this leader; potentially a real deep freeze because it has been running way too hot.

Always looking ahead, and only looking behind for frames of reference, we see that some macro signals are shifting beneath conventional market participants’ feet.  First, as I began clubbing people over the head with in January, the Treasury bond market was set up to catch everyone off guard.  Who called the bottom in bonds?  Why, none other than media star Louise Yamada and Bloomberg with the headline R.I.P. Bond Bull as Charts Say Last Gasps Have Been Taken.  All of this hysteria because Louise knew how to draw a single line on a chart of the 10 year yield.

“Prices of bonds are going to go down and you are going to lose your capital,” said Yamada, who began her technical forecasting career at Smith Barney under mentor Alan Shaw.

Here was my response from a post called, ironically enough,  R.I.P. Bond Bull!!!!! on December 16…

But let’s take it further and draw a different trend line than Yamada’s; let’s make a post-1986 trend line and then add a parallel lower line to form a trend channel.  Taking another step further, let’s note that the high set on the late 2013 GREAT ROTATION!!! (out of bonds and into stocks) hype in the financial media exactly 3 years ago is the decision point on a new trend, and that happens to more or less coincide with the upper channel line.

But first things first, TNX has not even broken the moving average yet (it is 2.69% vs. a current yield of 2.58%).