• 406 days Will The ECB Continue To Hike Rates?
  • 406 days Forbes: Aramco Remains Largest Company In The Middle East
  • 408 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 808 days Could Crypto Overtake Traditional Investment?
  • 813 days Americans Still Quitting Jobs At Record Pace
  • 815 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 818 days Is The Dollar Too Strong?
  • 818 days Big Tech Disappoints Investors on Earnings Calls
  • 819 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 821 days China Is Quietly Trying To Distance Itself From Russia
  • 821 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 825 days Crypto Investors Won Big In 2021
  • 825 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 826 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 828 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 829 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 832 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 833 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 833 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 835 days Are NFTs About To Take Over Gaming?
  1. Home
  2. Markets
  3. Other

Italian Bonds/Economic Data/Materials Raise Caution Flag

Our models remain bullish longer-term, but we have some concerns on a shorter-term time horizon. The yield on a ten-year Italian bond has crept back up over 5%, a level which was last seen just prior to recent corrections/big drops in stock prices (see purple arrows below). Economic data has started to weaken relative to expectations in a similar manner to what we saw in spring 2011 (blue arrow below). These readings do not mean a correction is coming, but they tell us to pay attention. Note the S&P 500's performance after the blue and purple arrows below.

$SPX (S&P 500 Large Cap Index) INDX

As we noted yesterday, materials stocks (XLB) are still contained within a two-month consolidation pattern. If the economic outlook is favorable, we would expect to see XLB break to the upside. If XLB can close above 37.65 in a convincing manner, it would alleviate some of our concerns relative to the market's short-term outlook. A failed XLB breakout or push below 36.50 would heighten our concerns.

Materials ETF (XLB) - Daily Chart

Higher highs in stocks remain quite possible, but a weak push toward 1,430 could be met with resistance from sellers between Wednesday and Monday. Nothing too alarming has occurred yet, but enough to watch with a skeptical eye.


Back to homepage

Leave a comment

Leave a comment