As I keep saying, it doesn’t matter what we think… it’s what the market thinks that matters.
Personally, I think it’s insane that the Fed has nationalized the entire debt markets. Similarly, I think it was a massive mistake to shut down the economy. And I think that the human suffering created by this mess is truly horrific.
Stocks don’t seem to think any of this. Stocks think that things are going to recover relatively quickly. I think that’s insane, but again, as an investor, it doesn’t matter what I think… it’s what the market thinks that matters.
With that in mind, stocks are breaking through resistance this morning. Multiple “risk” measures I track suggest we’re moving higher.
The ratio between stocks and Treasuries has broken above its 50% retracement and held there.
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Credit spreads have held support (reds line) and are forming bull flags (red lines). This suggests an upwards breakout which would be decidedly “risk on.”
And finally, breadth continues to move higher. Moreover, every correction in breadth has held support before breaking higher (red lines). This tells us more and more stocks are joining into the rally. That is what we need to see for a new bull market to begin.
Again, I think the fact this is happening during an economic depression is insane. But as investors, it doesn’t matter what we think… it’s what the market thinks that matters.
And the market thinks more upside is coming.
They also think the Fed and other central banks are going unleash an inflationary storm. Gold is breaking out in every major currency.
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Chief Market Strategist
Phoenix Capital Research