Brokers and Registered Investment Advisors who have been in the business long term know of clients who are "wrong way Charlie's" who contact them in fear at bottoms and in euphoria at tops. They are valuable clients as consistent timing indicators for risk application or reduction. Rupert Murdoch is human, puts his pants on one leg at a time, and is vulnerable to the same foibles of the human condition. Again, I just note the interesting flower that seems to bloom consistently every seven-ish years in price and time.
Brief update on my prior posts here and here regarding a shift in risk. Fixed income continues to play defense with long end Treasuries outperforming. Despite equity strength, Treasuries act bullish on an absolute basis as well. Junk credit has jumped the shark with the sharp declines in JNK and HYG (the latter puncturing under the 200 day). This includes deterioration in relative spreads to Treasuries and corporates.
Dollar yen has bounced slightly from its lows of last week. This morning it has shown stalling action from the the past two days and change of rebound from last Thursday's drubbing. The cross remains just above critical support for bulls as volatility stays tightly compressed. Dollar/yen tends to positively correlate very highly (pegs 1 on the 20 period) with the SP 500.
In another galaxy far far away, equities - for now - care not. Led higher by a thinning herd of large cap out-performance, stocks look set to power higher despite continued extreme sentiment readings in the CS Fear Barometer, CBOE put/call ratio (weekly 5 day exponential average), CBOE Skew, and the Rydex Ratio. Despite the negative divergence with credit, SP 500 sector internals show risk-on money-flows from the relative rotation graph.
For my growth system and given the prior six distribution sessions for the NASDAQ and five for the SP 500, I await a follow-through day (1.2% gain in the major averages on increasing volume from the prior session before redeploying risk capital.) For more on distribution definition, go to page 29 here and page 30 for follow through session examples.
I suggest using a faster time constant exit on equity positions given the action in credit. Go with the uptrend and buy any dip mantra, but keep positions on a tighter leash as well as perspective. The uptrend may really accelerate here but the credit foundation has shifted.