U.S. stocks sank, erasing the 2011 gain for the Standard & Poor’s 500 Index, and Treasuries rallied as Japan’s nuclear crisis worsened. The yen rose to a 16-year high versus the dollar on speculation investors will buy the currency to fund rebuilding projects.
There is a general cycle to the way markets rally and sell-off. For more on this, read John Murphy's Intermarket Analysis, Currency Trading and Intermarket Analysis, and Martin Pring's The All Seasoned Investor. These movements are obviously not perfectly timed; however, there is a noticeable cycle. At this point in the recovery (6+ quarters) Treasuries should be selling off as investors move assets from less risk (Treasuries) into more risk (Stocks).
Both the IEFs and TLTs have moved above the 200 day EMA. This indicates a possible shift from bear to bull market. This move is very important, as it could represent a fundamental shift in investor psychology.
At the same time, we've had strong sell offs in all the equity markets. The SPYs topped out at roughly 134.5, meaning a 10% sell-off would be to the 121 area. Right now stock prices have moved 6% lower.
Commodities have sold off: grains are all lower, gold hit resistance and moved lower, copper is down, and oil has definitely sold-off.
This movement has only been going on for a few weeks, so we are still in the correction stage. However, the events in Japan are not settling down; in fact, they are getting worse.
Barry recently noted he is mostly in cash right now, in a wait and see mode. I think that's a pretty good posture.
