Increasing Vulnerability Before End of Year

The DJIA has MRI levels near the tops of their historical ranges. The Macro (long term) MRI continues to be positive but is at the 95th percentile of it levels since 1918. Its Micro (short term) MRI is at the 89th percentile. This market continues to be resilient but is nearing a natural transition to weaker resilience (greater vulnerability). A weakening dollar may contribute to higher Micro (short-term) resilience for this index. The more domestically-biased S&P and DJ industrial sectors lost their Micro MRI a week ago (November 3, 2017). As indicated in prior notes, with the increase in market vulnerability the character of the US large cap market is shifting toward having greater volatility.

The US 10y Treasury bond index is a mirror image of the DJIA. The Macro MRI continues to be negative but is at the 10th percentile level since 1983. Its Micro MRI is at the 11th percentile. This index is likely to shift to having higher resilience over the coming weeks.

The SPGS Commodity Index has a low Macro MRI (14th percentile since 1971) that is moving higher and a high Micro MRI (96th percentile). Importantly, the Exceptional Macro is present for this index. Overall, this index remains resilient.

For the dollar index, DXY, the long-term trend is still negative, as reflected in the absence of the Macro MRI. Its Micro is present at the 80th percentile and is moving higher. After it reaches its peak, DXY is likely to decline in the absence of any positive MRI.

The relative resilience of global inflation-linked bonds and world government bond index (WGBI), is currently favoring WGBI.

More broadly, the MSCI World Stock Index also has a high Micro MRI (89th percentile) and more moderate Macro MRI (80th percentile) compared to the US stock market. The US stock market is more advanced in the cycles than are the other major stock markets, which are likely to continue to exhibit resilience.

Japanese stock index, Topix, is at an inflection point in the Micro MRI. The Micro MRI is at the 99th percentile since 1972, and is likely to cease in the next few weeks. The Macro MRI for Topix is still moving higher and is at a moderate level (70th percentile since 1972), leaving room to move higher. Topix is likely to pause in its upward movement, but is, at this point likely to resume its upward movement after the pause.

The Russell 2000 lost its Micro MRI this week. It continues to have its Macro MRI, which is at the 82nd percentile since 1985. This index could experience some near-term declines.

All We Need is a Catalyst

Many of the stock indexes have Micro MRIs that are high and have recently shifted or will soon shift to their vulnerable phases. This alone can result in greater price volatility while the long term trend remains positive.  For some markets (e.g., the US stock market DJIA), the Macro MRIs are also at high levels.  Thus, at least on a short term basis, the markets are in a somewhat precarious state for shocks. Debt ceiling, tax reform jitters, North Korea or other issues could be catalysts for a more major shift in the markets.  Any of these could be seen as causing a shift to a more negative long term trend in stock prices.

Our portfolios are fully invested right now, despite this situation. Historical testing indicates that it is better to accept some early volatility and declines rather than to move assets in anticipation of greater volatility.

September 2017

Market Overview

As a quick reminder, I describe the Market Resilience Indexes in a footnote[1].

A. Stock markets…

Most major stock markets around the world have strong and positive Macro (long-term) MRIs. This indicates that the longer-term price trend is still positive. The DJIA has proceeded further along this positive trend than other major markets and is therefore closer to the inevitable end of the positive trend. However, for the time being, the trend for the DJIA continues to be positive. Most major stock markets around the world can recover quickly from declines related to the near-term events. If the positive Macro MRIs were absent, the potential for a quick recovery would be greatly diminished. 

Their Micro MRIs have been in the downward leg of their cycles for several weeks and are not providing any resilience to negative news.  This state indicates short-term vulnerability, and we have been seeing higher price volatility over the last several weeks as a result. Importantly, the Micro MRIs already descended to low levels by the end of August. As of last Friday (September 1^st), the Micro for the DJIA is at the 35^th percentile since 1918, which is a moderately low level – 65% of the weeks since 1918 have higher levels. And it is trending lower. Other markets have even lower levels, as shown below. The lower the percentile rank, the more the market has already descended to short-term lows.

a.      DJIA – 35^th percentile

b.     DJ and S&P Industrial Sectors – 11^th (the “industrial sectors” are more domestically focused than the DJIA listed above)

c.      Russell 2000 – 22^nd

d.     DJ Transports – 11^th

e.     NASDAQ – 24^th

f.       UK Stocks – 14^th

g.      Europe – 14^th

h.     Japan – 14^th

As you can see, the major stock markets were at relatively low levels as of last Friday. They are likely to shift to a positive reading and provide short-term resilience over the next few weeks. If the curse of September, the storms, and the North Korea tensions occurred when these values were higher, say at the 80^th percentile or higher, the downside would be greater and the condition described earlier would have been met.

The net effect of the current condition is that while the markets may decline with the news of the day, they are likely to recover quickly. This leaves little opportunity to exit and re-enter the markets.

B. US 10y Treasury Bond Futures (TY1)

The Macro MRI is trending lower and is at a low level (7^th percentile since 1986) and the Exceptional Macro appeared recently (8/18/2017).  Both suggest that the Macro may shift to a positive state in the coming weeks or months.  These longer-term indicators highlight the potential for a strong move higher – one that is beyond what might result from near-term fears linked to the news of the day.

The Micro MRI, which measures shorter-term resilience, has been trending positive for several weeks. It is at the 43^rd percentile since 1986 and can continue higher for several weeks. The net effect is more resilient bond prices over both shorter and longer horizons. 

C. Commodities

The SPGSCI continues to be rated 3 (highest resilience), but this rating has been borderline for several weeks. Its Macro has been trending positive but is very shallow; it could easily move negative and cease to provide resilience. The Micro MRI is at a high level (80^th percentile since 1973) and may cease over the next few weeks. Thus, the 3 rating continues to be borderline and at risk.  

D. Dollar (DXY)

DXY is experiencing only Micro (short-term) resilience. Its Macro and Exceptional Macro are not close to turning positive. The Micro MRI is at the 15^th percentile since 1970 and could continue to be positive for several weeks. However, DXY’s Micro has been erratic over the recent period (beginning in roughly April); it has shifted between being positive and negative over this time period. Furthermore, its Macro is at a relatively high level, which suggests that there is more downside to DXY than upside.

* An early version of this post indicated 67 years in which the conditions had been met.  Of those, 43 were for the September declines and 24 were for March declines.    

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[1] I use proprietary metrics to determine where current price levels are relative to their historical norms. The Market Resilience Indexes indicate where prices are relative to their long-term (Macro) and short-term (Micro) historical cycles and whether they are moving toward their historical peaks or troughs.  Cycles for the Macro MRI last several quarters to multiple years.  Cycles for the Micro MRI last four to six months.  The presence of the Exceptional Macro MRI indicates that the Macro MRI is likely to move from a negative trend to a more positive one.

Managing The September Curse

You may see a few articles such as this one about the poor stock market returns that tend to occur in September.  As the article points out, September can be a trying month that ends with negative returns. Add in tropical storms and North Korea tensions and we can see why professional investors become nervous.  While I don’t try to forecast the weather or geopolitical events, I do assess the market’s ability to recover quickly from whatever events do take place by virtue of the market’s inherent resilience.

The investment process used to create the Focused 15 Investing model portfolios systematically evaluates whether it makes sense to reduce exposure to the stock market for the month of September. At the end of August, it will reduce exposure to stocks if the Micro MRI is higher than a specific threshold. If this condition is met, I expect price movements to be negative in September and for prices to remain low for some time. The process then takes some money out of the market. The rationale is that if the Micro is at a high level and is likely to turn negative in September and cause assets to be taken out anyway, do not wait for the turn negative event ― just reduce assets at the end of August.  This decision rule would not be in the process if it didn’t add value over the last 100 years.  Indeed, since 1918, these specific conditions have been met in 43* of the 100 years. This “conditional price movement” technique for September adds about 1.67% on an annualized basis over 100 years, which is a respectable amount.  This type of conditional technique working with the MRI information is important to the investment approach. So important, in fact, that I named my firm CPM Investing, for conditional price movement.

During the evaluation this recent August, the conditions were not met, and there was no change in the target weights. The Micro MRI for stocks was already quite low, which means that the market is closer to making a short-term move higher. After any decline in September, the market will most likely follow the trend indicated by the Macro MRI, which is positive at this time. While September may be bumpy, no change in target weights is justified.  

Current Market Environment

As a quick reminder, I describe the Market Resilience Indexes in a footnote[1].

A. Stock markets…

Most major stock markets around the world have strong and positive Macro (long-term) MRIs. This indicates that the longer-term price trend is still positive. The DJIA has proceeded further along this positive trend than other major markets and is therefore closer to the inevitable end of the positive trend. However, for the time being, the trend for the DJIA continues to be positive. Most major stock markets around the world can recover quickly from declines related to the near-term events. If the positive Macro MRIs were absent, the potential for a quick recovery would be greatly diminished. 

Their Micro MRIs have been in the downward leg of their cycles for several weeks and are not providing any resilience to negative news.  This state indicates short-term vulnerability, and we have been seeing higher price volatility over the last several weeks as a result. Importantly, the Micro MRIs already descended to low levels by the end of August. As of last Friday (September 1^st), the Micro for the DJIA is at the 35^th percentile since 1918, which is a moderately low level – 65% of the weeks since 1918 have higher levels. And it is trending lower. Other markets have even lower levels, as shown below. The lower the percentile rank, the more the market has already descended to short-term lows.

a.      DJIA – 35^th percentile

b.     DJ and S&P Industrial Sectors – 11^th (the “industrial sectors” are more domestically focused than the DJIA listed above)

c.      Russell 2000 – 22^nd

d.     DJ Transports – 11^th

e.     NASDAQ – 24^th

f.       UK Stocks – 14^th

g.      Europe – 14^th

h.     Japan – 14^th

As you can see, the major stock markets were at relatively low levels as of last Friday. They are likely to shift to a positive reading and provide short-term resilience over the next few weeks. If the curse of September, the storms, and the North Korea tensions occurred when these values were higher, say at the 80^th percentile or higher, the downside would be greater and the condition described earlier would have been met.

The net effect of the current condition is that while the markets may decline with the news of the day, they are likely to recover quickly. This leaves little opportunity to exit and re-enter the markets.

B. US 10y Treasury Bond Futures (TY1)

The Macro MRI is trending lower and is at a low level (7^th percentile since 1986) and the Exceptional Macro appeared recently (8/18/2017).  Both suggest that the Macro may shift to a positive state in the coming weeks or months.  These longer-term indicators highlight the potential for a strong move higher – one that is beyond what might result from near-term fears linked to the news of the day.

The Micro MRI, which measures shorter-term resilience, has been trending positive for several weeks. It is at the 43^rd percentile since 1986 and can continue higher for several weeks. The net effect is more resilient bond prices over both shorter and longer horizons. 

C. Commodities

The SPGSCI continues to be rated 3 (highest resilience), but this rating has been borderline for several weeks. Its Macro has been trending positive but is very shallow; it could easily move negative and cease to provide resilience. The Micro MRI is at a high level (80^th percentile since 1973) and may cease over the next few weeks. Thus, the 3 rating continues to be borderline and at risk.  

D. Dollar (DXY)

DXY is experiencing only Micro (short-term) resilience. Its Macro and Exceptional Macro are not close to turning positive. The Micro MRI is at the 15^th percentile since 1970 and could continue to be positive for several weeks. However, DXY’s Micro has been erratic over the recent period (beginning in roughly April); it has shifted between being positive and negative over this time period. Furthermore, its Macro is at a relatively high level, which suggests that there is more downside to DXY than upside.

* An early version of this post indicated 67 years in which the conditions had been met.  Of those, 43 were for the September declines and 24 were for March declines.    

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[1] I use proprietary metrics to determine where current price levels are relative to their historical norms. The Market Resilience Indexes indicate where prices are relative to their long-term (Macro) and short-term (Micro) historical cycles and whether they are moving toward their historical peaks or troughs.  Cycles for the Macro MRI last several quarters to multiple years.  Cycles for the Micro MRI last four to six months.  The presence of the Exceptional Macro MRI indicates that the Macro MRI is likely to move from a negative trend to a more positive one.

Are Stocks at a Peak?

A slightly pessimistic tone has developed in the markets. The geopolitical risks involving potential clashes with North Korea and Venezuela seem to have influenced markets. We also have words of caution from well-known investors about near-term market declines. Jeff Gundlach, a well-respected bond manager, has said that those holding risky bonds should start heading for the exits; he mentioned high-yield bonds and emerging market bonds. Others have echoed his comments.

This is a good time for us to assess the stock market’s ability to rebound from geopolitical shocks, its maturity, and how this bull market might proceed from here.

In a letter to clients a few weeks ago, I recommended reducing the equity exposure of their portfolios to 80% from 100% by July 28. Our research indicated that the stock market was losing resilience, and a shift in allocation was appropriate at that time.

While our portfolios became more defensive, many of our indicators suggest that the market will be able to rebound from any near-term declines that may be caused by moderate shocks. The long-term trend of the stock market is still positive. Near-term vulnerability will be replaced by higher resilience in a few weeks.

Of course, the magnitude of a geopolitical event is important ― a sizable nuclear conflict may overwhelm any inherent market resilience. Nonetheless, the market is still relatively resilient and should be able to recover quickly from market declines that fall short of that unthinkable event.

Regarding the cautious tone from well-known investors, we do not see the typical signs of the stock market reaching a peak and then experiencing protracted declines. Again, the longer-term positive trend in the DJIA is still intact.  

What History Tells Us About Market Declines

Our research on the last 100 years of stock market price movements indicates that protracted market declines are typically foreshadowed by a weakening of our proprietary Macro Resilience Index. Weakening resilience suggests greater vulnerability, and then some catalyst occurs to initiate the protracted decline. The progression from resilience to vulnerability to decline typically takes place over a period of a few quarters, giving advanced notice to reduce exposure to the stock market. This is generally true for the prominent declines of 1929, the 1970s, 2000, and 2008.  We are not yet in that type of environment.

However, the sharp decline of 1987 stands out as unusual. This decline was not foreshadowed by a smooth reduction in our long-term resilience measure. If we are indeed coming to a major decline while our long-term trend measure is still positive, it would be generally similar to 1987. Let’s take a closer look at what led up to the sharp 20% decline in August and September of 1987, exactly 30 years ago.

                                                                                                                                               

Our measure of the long-term trend (the Macro MRI) did shift to a vulnerable reading in November of 1986, almost a year prior to the decline, but it switched back to positive in May of 1987. And it made these changes after a long upward trend – almost 3 years after a decline in the Macro MRI and the stock market in late 1983 and early 1984. The Macro MRI had moved to a high level that placed it at the upper extreme of the range it has traversed over market cycles since 1918.

Today, the Macro MRI is positive, steady, and well short of its historic extremes.  Furthermore, it is moving higher in a recovery from the phantom bear market we experienced in 2015/6 ― just over a year ago.  In short, measures suggest this market is simply less mature and less extreme than the situation in 1987.

Let’s take a look at how prices actually moved in 1987 compared to today. The chart below shows the DJIA in 1987 with recent price movement as an overlay. These series start August 9^th of 1984 and 2014. 

The first thing that catches one’s eye is that the periods of strong upward movements and declines line up fairly well. Based on the apparent synchronization of peaks and troughs, one might conclude that we are on the precipice of a major decline.

However, as mentioned earlier, the level of maturity of the bull market is quite different. We estimate that our current level of maturity (corresponding to the current price level shown by the green triangle) is where it was in June of 1986 (white white), well over a year before the big decline.  We define maturity as the level of our Macro MRI, which can be thought of an indicator of investor euphoria. 

The chart above focused on price patterns, not actual returns. The chart below shows the same price movements in terms of returns.

The returns since the beginning of the chart for each time period are quite different. From August 9, 1984 to the top of the market in 1987, the DJIA rose 113%. Over the period from August 9, 2014 to August 9, 2017, it has risen 32%. The difference is big.

This information does not suggest there is no risk at this time. Thirty-two percent in today’s environment may somehow be equivalent to 113% in the 1980s environment of rapidly decreasing interest rates.  Historically, the best course of action has been to respond to the dynamics of the market as they present themselves at the time rather than to focus on repeating overall price patterns.  Our view could change in a matter of weeks should the underlying dynamics change. 

Near-term Outlook

I believe we will have a few weeks of soft prices and perhaps moderate declines. When those pass, we can expect a continuation of high resilience for stock prices.

Other Markets

Emerging market bonds, as Jeff Gundlach suggests, appear to be at an inflection point. This asset has been resilient for several quarters but is quickly shifting to being vulnerable. There is still short-term resilience, but that is likely to fade in a few weeks. Historically, this asset has not decline dramatically during the early stages of vulnerable periods.  

The SPGSCI (commodity index) is generally resilient. It has been borderline with a potential shift to vulnerable, but the shift has not taken place. Short-term resilience is developing.

Stock Market: Continued Resilience

We are approaching what appears to be a minor inflection point in the US stock market. The shortest price cycle – the Micro Market Resilience Index – is approaching a historically high level for the DJIA.

That said, my work indicates it is too soon call the end of this bull market for large US stocks. The conventional wisdom is that this bull market started in early 2009 and that it is already one of the oldest since WWII ( http://fortune.com/2017/03/09/stock-market-bull-market-longest/). The 8+ years of upward price movement places it as the second longest in the post war period.

However, my work indicates that the 2009 bull market ended in late 2014 to early 2015 (https://marketresilience.blogspot.com/2016/08/week-of-8222016-market-resilience-index.html). There was a clear bear market in terms of various resilience measures in 2015/16 but prices didn’t decline in the absence of resilience. I suspect that very low interest rates and a global effort to combat deflation were enough “good news” to prevent stock market prices from finding equilibrium at a level more consistent with their resilience levels.

Instead, the market trough was muted and the Phantom Bear Market of 2015/16 came and went and no one noticed.

Thus, the current bull market began in roughly March/April of 2016. The long term trend (Macro MRI) began moving higher at that time, well before the US presidential election in November 2016. The current bull market is therefore just over a year old. Market behavior (as measured by the various MRI) over the last year fits the image of a new bull market: very strong resilience in the first approximately twelve months, with moderate strength continuing for another few quarters.

I do not expect large price declines as we come upon the inevitable end of the positive short-term trend (of the Micro MRI). At this time, it does not appear that the declines will be like those of 2008, which dramatically marked the end of a bull market.

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Our publications use price-based algorithms to determine the "resilience" of major markets, and our model portfolios are designed to rotate among markets by favoring the resilient markets and avoiding the vulnerable. Resilience describes a market's mood and relates to general investor enthusiasm. Resilience is seen in a market's ability to recover quickly from negative news and events. Changes in resilience over time are rhythmic and we seek to identify inflection points; these are appropriate times for shifting assets among markets.

Today's Drop and Uncertainty in Washington

The news today seemed to drive the market.  Concerns about the Trump presidency and his agenda being derailed were common topics in the press.  The Focused 15 Investing approach is based on systematic assessments of the market’s resilience, not on forecasts of a particular outcome of current events.  That said, in the past, I have indicated when I believe the market will recover quickly from bad news or simply move higher.  Three recent prominent events are interesting because they occurred at the naturally occurring low points of the Micro Market Resilience Index (MRI).  They are the Brexit referendum in June 2016, the US presidential election in November 2016, and today’s recent sell-off being associated in the press with the Trump/Comey events. 

The following chart shows the DJIA, the Macro and Micro MRI, and the timing of these events.  One can see that these events correspond to low points in the Micro MRI.  The current level is at about the 12^th percentile of the weekly levels since 1918.  Eighty-eight percent of the weeks since that time have had higher levels. 

  

                                                                                                                                             

This chart is interesting because it shows how the slope of the Macro determines how prices will move on the down-leg of the Micro MRI cycle.  When the Macro slope is clearly negative, as it was in September 2015 and February 2016, the price declines were pronounced.  When the Micro had similar down legs and the slope of the Macro was positive, the price declines were less dramatic as seen in May 2016, September 2016, and January 2017.  

This pattern is what we expect from the market when viewed through the MRI lens.  Thus, I expect the market to recover from the recent events, consistent with the positive sloping Macro MRI and the higher Micro MRI levels.   

The chart also shows that the Macro MRI is at a relatively high level.  The top of this cycle may be moving into a mid-term time frame, perhaps later this year.  

The Market Will Hold On to Gains

The US stock market (as measured by the DJ Industrial Avg.) will most likely hold on to the gains of the last few days. Last week, I wrote in a letter to clients that the market is likely to move sharply higher. This appears to be taking place. The mood of the market is shifting to a more resilient stance, and this is likely to last for several more weeks.

With all due respect to France and the French vote, the rebound we are seeing is tied more to rhythmic changes in market resilience than to the French election. The outcome of the French vote may be a catalyst, but the conditions were in place for a catalyst to have a positive effect.

As of last Friday (April 21, 2017), the shorter-term resilience level was notably low. Last week’s level, as measured by our Micro Market Resilience Index (MRI), was lower than 93% of the weeks since 1918. Assuming simply a reversion to the mean, one could expect Micro resilience to start moving higher.  

As the Micro MRI turns positive, it will join the currently positive long-term resilience trend, which we measure with the Macro MRI. The Macro MRI measures resilience trends lasting many quarters. The current Macro trend is positive and has been since mid-2016, even as we move through multiple Micro cycles. The positive combination of Micro and Macro MRI suggests that the market will hold on and even add to recent gains over the next several weeks. Higher resilience often leads to higher prices. 

It is appropriate to remain fully invested in stocks. 

A February Trump Dip?

US large cap stocks will continue to be only somewhat resilient over the next few weeks. Stock prices will be choppy and may, as I mentioned in a prior comment, experience abrupt declines within a longer-term trend of higher resilience and likely higher prices. Longer-term investors may not be able to take advantage of any declines, while investors willing to trade frequently may be able to benefit from the short-term market moves.

The most interesting upcoming dynamic right now appears to be in the bond markets. I expect the resilience of the 30-year Treasury bond future (US1) to decline more dramatically in the next few weeks. With less resilience, prices are likely to move lower. The same is likely to be true for the 10-year Treasury bond future (TY1).

Trump Rally – Not Accurate

The recent stock market rally has been called a Trump Rally. However, based on the shifts in market resilience that I measure, this is not accurate. We are still experiencing trends in major markets established before the US presidential election. The Market Resilience Index (MRI) ratings are completely systematic and don’t assess political events directly. The MRI ratings anticipated a rally before the election, when many were expecting a Clinton victory.

For the most part, prices are moving in line with their levels of resilience. US large cap stocks are continuing a trend toward higher resilience that began in early 2016. The price movements since then have been consistent with a rhythmic shift of resilience on an upward trend. In addition, the market does not appear overly euphoric.

A shift in resilience that began in late September 2016 favoring inflation-linked bonds over nominal bonds (globally) is continuing. Price movements since then have been consistent with the rhythmic shifts expected of the higher relative resilience of inflation-linked bonds.

The 30y Treasury bond reached peak resilience in early July 2016. The 10y Treasury bond reached peak resilience in late August 2016. The price movements since those times have been consistent with the rhythmic decreasing levels of resilience for both markets.

It is not appropriate to link the rally directly to Trump, and it is not appropriate to link the current choppy stock market to him either. Had Clinton been elected, we would be experiencing a similar pattern. The magnitudes might have been different between the two, but the timing would have been similar.

Therefore… Not a Trump Dip

Based on market resilience, the stock market is more vulnerable now and will react more harshly to negative news than it would have 6 or 8 weeks ago. If the market drops over the next four to six weeks, and it appears to be correlated with something Trump does or says, be skeptical — it is not a Trump dip or a market verdict on the news of the day. When the market rebounds a few weeks later, be skeptical of pundits who say that some course has been corrected.

Of course, the market will sell off on calamitous events like earthquakes, some political events, surprise actions by the Fed, and other shocks. However, movement that is often attributed to news events is more a function of changing market resilience than the news itself.

January 2017: A Minor Inflection Point

Please see the links above and to the right for information on the MRI ratings and Focused 15 Investing.  

US large cap industrial stocks shifted this week to somewhat resilient, a market resilience index (MRI) rating of 2 on a scale of 0 to 3, with 3 being most resilient. Risk assets in general have been resilient (MRI rating of 3) since before the November election and this represents a minor inflection point. The decrease in resilience may result in temporarily lower prices for these assets, but the declines are unlikely to last long enough to for investors to trade them. Price could well be higher several weeks from now.

While these comments are specific to US large cap industrial stocks, other major stock markets are in a similar circumstance with respect to resilience. These comments also apply to US transportation stocks, Japan stocks, and Europe stocks.

Other markets are still rated highly resilient (MRI rating of 3). These include NASDAQ, UK stocks, US small cap stocks, and emerging market stocks. These markets are more resilient but may be affected by the choppiness of the markets mentioned above.

Yields on the US 10 year bond have been resilient (MRI rating of 3) for the last several weeks. The rating dropped to 2 this week — also a minor inflection point. The mid- and longer-term measures of resilience for the 10y yield are still positive. Yields may decline over the next six to twelve weeks, but the trend toward higher yields appears intact at this time.

Bond prices are correspondingly more resilient over the short term.  However, the longer-term trend toward lower bond prices appears intact.

Gold is somewhat vulnerable. It moved last week to a MRI rating of 1, up from 0. There may be some recovery in Gold prices, but the mid-term outlook continues to be weak.