Equities setup and tape

The bullish setup in equities several weeks ago, referred to as interesting, has pushed the stock market higher. While leveraged money flows have not changed much since the mid February, they have not been matched by the force of the tape. Volume both at critical resistance and supporting the advance has been weak relative to the force of the previous decline. While nonconfirmation of the tape can exist over extended periods without repercussions, it like the previous bullish setup in equities is certainly interesting.

NYSE Composite and exchange volume:

Gold Shares Follow Gold

Stretch a rubber band too far, and it will snap back hard when it gives.

It is always a dangerous assumption to believe that it's different this time. Gold stocks take their lead from gold not equities. The historical relationship, rubber band, is being stretched hard in 2010. When the rubber band gives without warning, it will snap back hard. This will leave many gold share investors without positions.

Gold-Plated Tungsten Bar At Heraeus Gold Foundry With Bank Origin

Tungsten filled gold found at Hergus gold foundry in Germany. This should be no surprise to readers as smoke plumes, suggesting fire, are not limted to Germany. Be wary, the lack of confidence in any product that represents a proxy to gold will ultimately be reflected in its price.

Source: youtube.com

Greek PM: gov't needs to borrow at normal rates

Ignore Greece for a moment. Do Europe, United States, and parts of Asia deserve to borrow under current terms? As the debt pile continues to grow across the West, is price no longer a function of risk in the fiat system? The rising price of gold in large part reflects the answers to these questions.

Prime Minister George Papandreou says that if Greece cannot borrow on terms that are similar to those enjoyed by other European Union countries, the results will be "worse than catastrophic."

Source: finance.yahoo.com

Japanese Yen

While the world focuses on the flavor of the day, troubles in Greece, it continues to ignore the persistent strength in the Japanese Yen relative to the dollar. Once the carry trade currency of choice, the Yen is embarked on a bullish run against the dollar since 2007. How can the world's reserve currency be a safe haven when it continues to undeperform the world's carry trade currency? I can't. That's because the world's reserve currency is the new carry trade currency. This means that its status as a safe haven is largely an media driven illusion.

Japanese Yen ETF (FXY) vs S&P 500:


The Yen's battle with resistance reminds me of the old Aerosmith song, Chip Away the Stone (1978).

Japanese Yen ETF (FXY):

20yr+ US Bond Yields finish 2010 Poll

A thanks to 187 that voted.

Nearly 80% of the responded voted that interests rates will be higher in 2010. Just under 20% thought they would decline.

As I have suggested before 2010 will be classified as a battle between the immovable object and the unstoppable force in the US long bond market. It all boils down to whether price is set by perception or fundamentals. As eluded to in previous commentary about Greece, this problem, like all before, will be pressed until the money is wrung out.

While we haven't see full court press yet, someone is pushing.

Long-Term U.S. Government Bonds Total Return Index (LTGBTRI):

Seasonality

Time is the most important indicator. When time is up the market must change trend." - W.D. Gann

A look at general seasonality cycles as March begins trading.

1925-2009: Time