Pigs Break Out w/ Yields

May 21, 2015

It is too early to call it a confirmed breakout, but the Bank index has popped above cyclical bull market highs.  Weekly MACD and RSI both look good.

The monthly chart shows that BKX has been consolidating above a long-term support area for the better part of 2 years.

I had thought the BKX had a decent chance of topping out and a one day (Tues.) pop above resistance does not negate that possibility.  A lot will depend on interest rates.  The Pigs like to be fed (no pun intended) cheap money and eventually churn it out into the economy at an ‘interest rate differential’ mark up.

The 30 year yield over threw to the downside and could be over throwing to the upside now, to even out the distortion.

Or, the ‘rising rate’ hype could be real and the bond bull could be over.  That will not be known until/unless the Continuum © breaks the monthly EMA 100 one day.

In the meantime, if yields do continue to rise (whether the yield curve rises or not, assuming the Fed remains lame on the Funds Rate) the banks will probably make a run for the resistance level shown on the second chart above.

Gold on the other hand, which we have shown to have been ‘anti’ the Pigs, would need the yield curve to also be rising in a rising nominal interest rate environment or there would be more trouble in Bugville.  Here is weekly BKX and Gold.

These items that have been ‘anti’ each other for so long would continue to be so if the chart below fails.  If not, gold can rise with the Bank index.

Here is the current daily view of said yield curve, using the 10yr-2yr spread.  The modest uptrend began in February and continues to today.

A weekly view lends longer-term perspective.


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Gary Tanashian of biiwii.com successfully owned and operated a progressive medical component manufacturing company for 21 years, keeping the company’s fundamentals in alignment with global economic realities through various economic cycles.  The natural progression from this experience is an understanding of and appreciation for global macro-economics as it relates to individual markets and sectors.

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