This is an abridged version of our Daily Report.
Bloodbath in bonds
Corporate bonds have been hammered, with Tuesday seeing the worst breadth readings since 2008 and 2013. Those two crises (the financial meltdown and the end of QE) were the only ones that matched Tuesday’s carnage.
Forward returns were excellent after other times the market suffered panic-level selling pressure.
Small-cap investors shrug off disappointing economy
Small-cap stocks have reached record highs even as the Citi Economic Surprise Index (CESI) hits a multi-month low. The Russell 2000 is the most highly correlated index to the CESI so this is relatively unusual. Similar behavior led to further gains for the Russell, but the S&P 500 did even better.
The Optimism Index on crude oil is back above 70. Since 1991, that has led to gains in oil over the next month 44% of the time, averaging a loss of 0.7%, according to the Backtest Engine
For access to the full report, indicators, charts, screens, and Backtest Engine, log in or sign up for a free 30-day trial today.
The post titled Corporate Bonds Suffer As Small Caps Shrug Off Economic Reports was originally published as on SentimenTrader.com on 2018-05-17.
At SentimenTrader.com, our service is not focused on market timing per se, but rather risk management.
That may be a distinction without a difference, but it's how we approach the markets. We study signs that suggest it is time to raise or lower market exposure as a function of risk relative to probable reward. It is all about risk-adjusted expectations given existing evidence. Learn more about our service , research, models and indicators.
Follow us on Twitter for up to the minute analysis of market action.