Photo JR Lancaster
Naturalists will tell you that everything in life is reflected in nature. Or is that everything in nature is reflected in life? Like reflection itself, one is the mirror image of the other.
Lao Tzu once said, “Nature does not hurry, yet everything is accomplished.†Reflecting on the markets and its gradual rise to new highs, has everything the market set out to do been accomplished?
Naturally it depends where one looks and reflects.
In the photo above, one cannot readily discern north from south. The mountains are reflected in both the sky above and the lake below. Similarly, a rising interest rate environment is reflected in an improving economy and vice versa.
In the Modern Family sectors, we look to see if the recent rally has accomplished a goal of convincing the Bears that the economy is improving.
The Federal Reserve has surely maintained an unhurried stance of raising interest rates. Yet, with the market’s recent move up and with the technical indicators pointing to a possible top in Long Bonds, is Fed policy now seeing its own reflection?
The rise in rates the monthly chart of TLT (20+ Year Treasury Bonds)suggests has yet to confirm or deny.
The TLTs daily chart shows it sitting close to a phase change to warning after one failed attempt in April and then another failed attempt in May. Since then, the 50 daily moving average has risen in slope and now acts as a line in the sand.
If the third time is a charm, then along with the channel top I showed in the monthly chart on August 8th, we see the top half of the current picture similar to the photo of the mountains. Rising interest rates looming above the horizon.
There are 3 sectors in the Modern Family our TLTs reflect most. Retail (XRT), Transportation (IYT), and Regional Banks (KRE).
Although none of those 3 sectors have cleared the 2016 highs yet, currently the sector with the best shot is Retail. 46.50, the 2016 high posted on March 30th. Immediately thereafter and for the next several weeks, XRTs price fell.
