Stocks 'N' Bonds

A few things to watch in the coming week.

Despite today's pullback, my primary indicator remains bullish, so I'm buying the dip.

The SPX buy write is lagging the underlying index, so the bulls are looking good for now.

The spread between equities and bonds looks ready for a breakout, potentially to the upper Bollinger.

HYG, which I've been a big fan of since here, had an EXPLOSIVE day. Fixed income continues to provide stellar capital gains as investors scramble to grab yield in this 0% environment. Taking partial profits is probably a good idea, but such decisions are dependent on your trading time frame. 88 looks like MASSIVE resistance.

JNK is following in the footsteps of its higher quality brethren, so keep an eye on this lovely ETF.

The market has had a stellar run of late, and conditions continue to grow more bullish. Another day of pullback and consolidation would be healthy for the bulls, but I'll let the tape do the talking. I'm maintaining a conservative position size per trade, but it is growing as the volatility decreases.

Assorted Auguries

A few themes to keep an eye on during the week.

The housing sector remains in an uptrend, but like so many indexes, a break below the weekly low is likely to bring sellers.

The regional banking index hasn't made a lower low during the last round of selling, perhaps this is the first sign of real stability in equities. At the risk of sounding like a broken record, the weekly low is critical.

I first mentioned JNK here, and it continues to be a profitable trade, making nice moves up with little volatility. My target is the upper Bollinger.

My first post about RGLD can be found here. It continues to make new highs, but the lack of volume isn't very encouraging. Nevertheless, price is the only thing that pays, and the trend remains long and strong.

While this chart is nothing to trade from, it is interesting to ponder. It represents instances of the word "recession" found via Google over the last year. Mumbo jumbo on how this statistic was aggregated can be found here.

Gold and fixed income will continue to keep my attention in the coming week. The potential for reflation is increasing, and since my indicators are technically positive, I will be giving the benefit of the doubt to the bulls. All the same, we are still in very high risk territory, and my small position sizing reflects this reality.

Bernanke's 0% Means Buy Junk

LQD has been good to me, so why not move down the quality ladder for higher yield?

I'm kicking myself for being too lazy to post this chart last night. The large volume in high yield corporate debt suggests that risk sentiments are changing.

If you like high yield, here is a ton of rising junk you might be interested in.

Emerging market debt is making a 2nd Bollinger violation. I wish there was more volume in this issue.

Muni's have found stability, and offer tax free yield.

Bonds are offering ridiculous yields whilst rising from panic induced bases. If inflation gets nasty, these will lag the market, but if you want to lock in yield, this collection looks promising. My trade in LQD has come to an end, but I think I'll try an scoop up some of these lower credit quality plays if the tape presents itself.

Ratio Roundup

My indicator was down today, but not broken. One sector is in critical danger.

The financial sector made a new O today, indicating an increasingly volatile and bearish environment.

The buywrite/index ratio is rising (bearish), but it approaching a falling 10sma (bullish).

This breakout in the HUI/GOLD is bullish for gold stocks, so I'm buying the dip.

Long/short commodities vs long commodities looks attractive here, but keep a short leash.

Risk appetite has yet to return as treasuries still outperform junk.

Banks look ready to fall again. Tomorrow will be crazy, and though we may see a rally, I think the market is ready to roll over. Hopefully gold will pullback, but if the dollar can't find support by Thursday, I'll be rolling into shiny yellow bricks and yen.

Ratios to Reason

The Buywrite Index has been crushing Buy 'N' Hold strategies for months.

Will the BXM:SPX ratio find resistance @ the 10sma?

Gold miners haven't lost much ground to gold, which I interpret as a bullish signal.

Long LSC and short commodities is one of the best strategies I can see. Up almost 20% since this mention on Sunday.

If I could short JNK I'd give this pair a shot too. Treasuries are still holding strong, but boy does it feel bubbly.

Just because Treasuries are going vertical, doesn't mean they won't go to the moon. Long the 20 year and short the shiny yellow stuff is still paying off, and could continue to do so for months.

Defense wins the game, and over trading will kill the most skilled speculator. I'm watching with amusement and trading vicariously through new found Twitter friends. Good luck out there, but I suspect Brian Shannon has the right idea.