But something has to give, there are far too many divergences to ignore.
Even with 10 and 30 year yields backing down ever so slightly, many bond market junkie's like me just don't trust the no inflation in the horizon myth. You don't need a tick up in inflation to get yields higher. Its a dangerous game of sell bonds to but equities. This is a serious flaw in many peoples thinking. Also the USD is trying to stabilize, but any break below 77.5 and its head for the hills time. I think the way its going to play out is this:
USD breaks 77.5, and trades to low 70's, where there is long term support.
Bonds sell off viciously and yields back up above the highs for the year.
Equities Rally to the next resistance level. Dow 10K and SP500 1075.
Crude Oil gaps above $80
This perfect storm will lead right into Labor Day, when the real traders realize that both higher crude and higher bond yields are not good for anyone, thus the long awaited sell off in equities will commence.
Shanghai stocks have stopped going up. This is the market that lead global equities higher. This can't be ignored. The recent news flow out of China is also negative in terms of accounting irregularities and bank lending concerns.
The Shanghai Composite has broken 3000
/>The SP 500 recent run up is the biggest ramp since the great depression. Its still ramping even in the face of a weaker dollar, weaker bond market, stronger crude, and a broken Shanghai Composite.
Walking in this morning I see the same crappy stocks gaping up. Citigroup, Freddie, Fannie, AIG, and CIT all up 5%-10%.
Completely out of control trading. Something has got to give and soon.
We may get to 10K and have CNBC celebrate it. We may not get there at all. That can be the biggest head fake of all time. It seems like everyone has that figure (DOW 10K) on their radars.
I am getting very anxious to get back on the short side.
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