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Forked

There is a beautiful symmetry on the ten year yield's monthly chart as our old friends the Andrews Forks clearly show. The downtrend from 2000 was obviously kaput by early 2004, at which point the drum beat grew louder in heralding the demise of the cyclical bull market in stocks. But a funny thing happened along the way; the shorts were blown up again and again as longer interest rates remained flat-lined (for whatever reason, and lord knows there is no shortage of theories).

Rates remain within a nearly three year range, but that looks like one hysterically bullish chart pattern and a new trend that had its humble beginnings back in 2003 may soon begin to assert itself. Also, note the nice bullish divergences on RSI & MACD. We have commodities showing bend but no break, global economies strong and worst of all for the US Dollar, the Euro and Yen getting a whiff of bullish fundamentals.

You can't have a weak dollar (and associated strong stock markets and commodities) forever with longer interest rates remaining contained. Oh wait, it's a new paradigm! No, it's not. Liquidity is washing over everything; gold, silver (wow!) and the raw materials of major developing economies have never been more expensive on the whole. There is no deflation. Not even the kind cooked up by the exploitation of third world labor. Dollars are everywhere!

It is a confusing time, and with the M3 looking glass about to be broken, divining hints for the future will be more difficult. Treasury yields will be but one tool of many that still remain viable to keep an eye on going forward.

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