Weekend Update – Bond, Dollar, Sector Rotation

Jul 8, 2007: 9:35 AM CST

Here are your major intermarket analysis charts at a quick, timesaving glance for you:

First, the 10-Year Bond Price is reconfirming its downtrend:

10yr-note-price.png

This is an example of an “Impulse Sell” trade where price makes a large impulse down, retraces back up, finds resistance at a key moving average, and then turns back down hard to continue its trend.

On the exact flipside, Bond Yields are participating in an “Impulse Buy” type scenario where price is confirming its uptrend (which has been a harbinger of bad news for the overall market):

10yr-bond-yield.png

Next, the US Dollar Index experienced a hard sell-off and just stopped short of making new lows.  It could be due for a quick bounce.
us-dollar.png

Finally, according to our 30-day sector rotation model, we are right on schedule near the peak of the cycle, yet the ‘money flow’ predicted by sector rotation theory calls for continuation of our ‘bull-market’ scenario we have now, as investors/big funds are currently in Technology (evidenced by new 6-year highs in the Nasdaq), industrials, materials, and (the big one) energy prices.

sector-rotate-30d.jpg

On the contrary, investors are currently punishing the sectors that do well in bear markets:  Consumer Staples, Healthcare, & Utilities.

Taken together, these evidence a strong case for the current bullish overall market environment.  However, rising bond yields could throw some confusion into the mix should they continue their recent trends.

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