Weekly Risk Signals

Bond market stabilization remains the catalyst that’s fueling the latest market run-up. I’m growing more confident that the hellish environment that’s had the risk-off asset performing worse than stocks could be nearing an end. Short-term conditions have turned much more risk-on over the past two weeks and I believe we’re seeing the melt-up scenario playing out.

What is the definition of “pivot”? The answer could determine where the market heads next in the near-term. From a stock market standpoint, anything less than a 75 basis point hike is probably bullish for equities. Short- and intermediate-term indicators seem to think that last week’s rally has some legs.

If we’re looking strictly at the risk signals, there’s still a bit of bullish sentiment underlying last week’s losses in risk assets. Lumber prices are up around 20% in just the two and a half weeks. Investors could be looking for a reason to become buyers again.