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Familiar Aromas

Another month in the books and another close on the highs for the SPX. Whether the proverbial skies are blue or gray - the equity markets don't seem to mind. While domestically the economic data has recently taken a turn for the worst, the bulls continue to churn sweet lemonade from lemons - most recently enjoying the squeeze of a beaten back dollar. Of two minds or twenty, the game is still a relative wager and with peripheral vision across both the Atlantic and Pacific, the dollar should find its footings soon enough.

As the aromas of disinflation waft through the system and into the bond market, we noticed that the UST:SPX ratio has shown some structural and momentum similarities to its cyclical pivot in 2007.

$UST:$SPX Chart
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Buttressing this perspective is the silver:gold ratio's massive and cascading disinflationary divergence, which was also present during the 2007 timeframe.

UST Chart
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Chart
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$UST:$SPX Chart
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$UST:$SPX Chart
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UST:SPX vs SPX 2007 2013
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Between the carry cocktail of the Australian dollar and the Japanese yen, the currency tinder is now dangerously divergent and dry.

BKX: SPX 2008/2009 vs Yen 2012/2013
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Beta also looks ready to burn and take the next stair lower.

RUT:SPX 1996 2013
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Rounding things out - the MSWorld Index (ex-US) appears to be tracing out a similar profile of the 2000 top.

MSWORLD Chart
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  • All stock chart data originally sourced and courtesy of www.stockcharts.com
  • Subsequent overlays and renderings completed by Market Anthropology

 

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