Last week’s huge rally in tech and communication services seemed to erase any short-term bearish sentiment as investors shifted away from defensive assets again. The Treasury market is failing to signal much of anything at the moment. Lumber is one asset class that gave no such mixed signals over the past week.
As has been the case over the past few weeks, all signals remain risk-on, but there are signs that conditions are beginning to deteriorate. Investors haven’t had much need for dollar liquidity as long as risk assets are providing much higher returns, but the current rebound in the dollar index could be signaling a return to safe havens. Interest rates, again, remain a concern.
All four signals remain firmly offensive following one of the more decisive risk-on weeks in recent memory. Just as was the case earlier in 2020, the mere idea of additional stimulus was enough to make investors push aside broader economic concerns. The Treasury yield curve remains a top factor to watch here.