Yield Inversion As Utilities Correct

This is an abridged version of our Daily Report.

Yield inversion

The yield on 2-year Treasury Notes is now higher than the dividend yield on the S&P 500. That’s the first time in 10 years, causing consternation among some who only look back that far, since it preceded the financial crisis.

But going back to the 1930’s, this was not uncommon and the only similar scenario led to a long-term bull market.

Utilities suffer a correction

The Dow Utilities index has dropped more than 10% from its recent high, entering (arbitrarily defined) correction territory. Yet the Dow Industrials have brushed that off and continued to make new highs in recent days.

That kind of disconnect has occurred only a handful of times, and has not been a good sign, especially for Utilities.

Good sign for energy

In the December 27 report, we looked at a big positive thrust in breadth in the Energy sector. In the past, if buyers continued to persist over the next two weeks, it was an excellent indicator for longer-term returns.

Video tutorial

For those who haven’t tried the Backtest Engine, we posted a video that goes over a simple test, looking at times there was an extreme number of new 52-week highs in Industrial stocks. It’s a brief introduction to using the feature to gain more insight as to what an indicator is suggesting. Almost all indicators and models on the site are available for testing.

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The post titled Yield Inversion As Utilities Correct was originally published as on SentimenTrader.com on 2018-01-11.

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