Bird’s eye view: taper off, recession on?

With the US 10 year yield flirting with 3% again today, US stocks are bouncing further as bonds sell off, apparently all on the belief that the economy is so weak, QE might not be tapered this month after all. Of course, the fact that growth is barely breathing even with 3 years of monumental Fed intervention doesn’t seem to phase bulls who are happy to recommend stocks at similar valuations as they did in 2007 before the financial crisis was nary a phrase in the mainstream’s lexicon.

Nonsensical diversions aside: this big picture view of the Canadian broad market TSX ( we are hardware store to the world after all) is not looking so perky, continuing to wobble around the 12,800 level now since the fall of 2011 (well actually since 2006 but why quibble).  11,000 remains the downside neckline test needed to finally resolve whether this secular bear will complete the massive head and shoulder’s pattern that has been looming over it for the past 2 years.  Resolution has been a long time pending but market forces move at a pace all of their own. No one gets to command timing–certainly not central banks or governments. All we can do is time our own capital’s exposure to the price cycle. Such is the test of public markets: they are perfectly adept at driving the weak, impatient and unaware into assets just as price risks are the highest, while scaring them out once prices have collapsed once more. Heartbreak hill indeed.

Chart source: Cory Venable, CMT, Venable Park Investment Counsel Inc.

Also see today’s Breaking Bad in Commodities Markets for some more useful insight. To wit:

“The real tell in the commodities market is provided by the industrial metals. Their summer rallies have run out of steam already, largely because investors ultimately can’t ignore the impact of supply surpluses in markets such as copper.

That prices for these metals are faltering, as they have for most of the past two years, tells investors that the secret sauce of a sustainable commodities rally, strong demand, is lacking. So far this year, the S&P 500 is up 18% while the Dow Jones-UBS Commodity index is down 7%. No good news there.”

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