These Bonds Just Triggered a Buy Signal
Bonds look like a buy again. Some of them, anyway.
Investment-grade bonds registered a new breadth thrust buy signal late last week. The new signal now flips Dean's investment-grade timing model to the long side after having been on the sidelines since January.
In a nutshell, the model uses bond market breadth data to identify trend changes in advance of price action alone. If there is a sudden thrust of advancing bonds relative to declining bonds following a lull, then it will trigger a signal. Walter Deemer, a respected market strategist, calls this "breakaway momentum."
The investment-grade bond timing model is more sensitive to movements in Treasury yields, whereas high-yield bonds will be more sensitive to economic/credit conditions. The recent decline in Treasury yields is playing a role in the new signal. We can see the last few years of history below.
While we should respect the message this can provide as it relates to the economy, credit conditions, and the stock market, we have to keep in mind that the data history is limited and the sample size is small.
What else we're looking at
- Stats showing the success or all prior investment-grade bond market timing signals
- What thrusts have meant for bonds and stocks
- The U.S. dollar is at a price and seasonality crossroads
- What the trend in leading economic indicators means for the Real Estate sector
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