Resumption of the Uptrend

Last week was a clear turning point in equities, as several of our trend-following indicators flashed buy signals. Our Market Trend portfolio at The Absolute Return gradually added to long positions during the week, and further adds are planned.

Two major indicators we follow include the relationship between Corporate Bond and Treasury Bond prices, as well as the relationship of Copper to Long-Term Treasuries.

Our Corporate Bond/Medium Term Treasury ratio (calculated by the LQD vs. IEF exchange-traded funds) generated a buy signal as the ratio climbed above its 34-day moving average and a ratio of LQD vs. the S&P500 fell below its 34-day moving average.  See the chart below:

Our Copper/Long-Term Treasury ratio broke above its 34-day moving average, generating a buy signal. This ratio is a proxy for sentiment towards economic growth, with copper as a leading industrial material. See the chart below:

As our indicators favor a bullish stance on equities, we plan to selectively add long positions and will reduce bond holdings as we follow the trend.

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