FINANCIAL ICEBERG
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 TECHNICALS
When Stocks and Bonds Are On a Collision Course 
​April 10 2017  ( From Tradingview  )



Since November 8 2016 started what I call the Trumpification of
​Financial Markets as pro-growth ​and reflation theme within a
​protectionism bias repriced violently all SP500 Major Market Sectors
especially the first two months (end of 2016)​.
​Sectors winners: Financial and Industrial,
​​Sectors losers: ​Interest rates sensitive: Utilities and Consumer Staples.

Financial assets like the SP500 had a very good performance indeed
​on TINA (There Is No Alternative)​ theme. Financial markets were in
strong Breakout mode since the result of the US Election; ​the strong
rally in stocks​ lately has been enough in terms of valuation 
​compare to interest rates.

​​But the most interesting factor have been the fact that the most
​interest sensitive sector XLU (Utilities Select Sector ETF) have recovered tremendously from the Trumpification repricing of November 2016. Not only that, we did have a break out on a daily basis on February 23 2017. (See first chart below - Red Trendline - Ellipse)​

On the other side, the Corporate Bonds ETF LQD (iShares iBoxx $ Investment Grade Corporate Bond ETF) was already in Breakdown mode before the US Election ( broke the Daily Support Trendline on October 26 2016).
(See second chart below - Red Trendline - Ellipse)

As stocks battle to keep near their high ever, bonds technicals were in a poor condition. So looking at a Monthly Ratio between the XLU ETF and LQD ETF, that will show how much the interest sentitive stocks sectors are on a comparable basis with Corporate Bond ETF. Obviously we ar at near record level.
( See third chart below - Monthly Candles) 

Taking other proxys bring the same result; it is not only a XLU ETF and LQD ETF mis behavior...

​​​​​​But few realize that already, one of the unintended consequence of that shift higher in Corporate Bond Yields is closing slowly the re-leveraging phase that did help tremendously the stocks performance with
​US corporations borrowing tons of money by issuing corporate bonds to buyback their own shares. FACTSETBuybackQuarterly

It can takes some time for that discrepancy to reverse (interest sensitive stocks not pricing the bond reality) and less buybacks going forward and like a train wreck, when the reversal will start, it will be tough to stop... 



When Stocks and Bonds Are On a Collision Course   $SPY, $IEF  #Trading #bonds  #investing #SP500
Utilities Sector ETF ( XLU )​
Daily Price ( Candles )
20 DMA ( Yellow Line )​
50 DMA ( Red Line )
​200 DMA ( Green Line )

 Corporate Bond ETF ( LQD )​ Daily Price ( Candles )
20 DMA ( Yellow Line )​
50 DMA ( Red Line )
​200 DMA ( Green Line )
Utilities Sector ETF ( XLU )​ Area - Blue Line
Financialiceberg.com
Financialiceberg.com
 MONTHLY RATIO
XLU ETF ( Utilities Select Sector)
​over 
LQD ETF ( iShares iBoxx $ Investment Grade Corporate Bond  )​​
Financialiceberg.com