After the strong Trump-rally markets have stabilized in the last 2 months. Stocks have gone bit higher, gold as well, but all other markets have been rather stable. That could be coming to an end now, as we see the first signs of a new trend. Spotting trends as they arise is one of the key challenges of investors because that is the only way to maximize profits with a minimum of risk.
We wrote in February of this year how 5 leading markets are trading at major inflection points suggesting that “something is brewing.” It appears now that the observations in that article are evolving in new trends.
This article provides a look at 4 leading safe haven assets: yields, US dollar, gold, Japanese Yen. The trend we spot on their charts is quite unusual and not what most investors would expect.
First, rising yields reflect ‘risk on’. Rising yields suggest that risk assets like stocks are in favor.
Right now, yields are rising and are setting up for a breakout above 25 points (2.5% in the 10-year yields). Such a breakout would be a very important event, as, if it would take place, it would confirm the continuation of the Primary Market Trend Of 2017 which we spotted last year. In other words, rising yields would be the dominant market trend, and that is the starting point for all market correlations.
As yields rise, bonds become less attractive and the U.S. dollar becomes more attractive. The dollar chart clearly reflects this point, as seen on the next chart (see also the annotations).
A rising dollar is mostly bearish for gold. That is in line with what we wrote in Dollar Continues Bull Market: Bullish for Yields but Bearish for Gold. No surprise there. Right now, gold could be violating an important trend line. If $1210 gives away, which seems to be happening right now, we see gold moving sharply lower until the summer of this year.
