Karpel’s Corner: Commodities Test Support; Bond Pop Starts to Leak

Welcome to Karpel’s Corner. This is where I throw out my thoughts on the markets and share some of my favorite strategies. I keep it market-focused, and never miss an opportunity to teach trading strategies and commentate on the latest trends affecting the financial markets. Hope you enjoy today’s post!

The anchor dragging down the whole commodity space has been Crude ($USO). We will discuss this topic today on Tradespoon Live TV at 11 AM, CST.

Of course, Crude isn’t the only pressure point.  The strong Dollar ($UUP) has also been a big catalyst for the downside pressure in this sector. There are almost 20 different commodities about to challenge support right now. Falling commodity prices are a signal of potential deflationary pressures.

The market bounced on Friday with the headline that both the EU and Asian nations are looking to stimulate growth, i.e. quantitative easing for foreigners. The strength in the Buck still leaves commodity markets and global markets on edge.

US Treasuries had what is called a blow-off top, with the early week blast to the upside in bonds ($TLT) to $127. That was met with nothing but selling for the rest of the week. This is encouraging action for the equity bulls.

Finally, Junk ($JNK) and High Yield Corporate ($HYG) bonds picked up and were in favor with buyers coming in all week. This is another positive for the equity bulls as Junk and corporate debt is highly correlated with the performance of the equity markets.

This all may be a positive turn, but you need to respect the current volatility environment. My advice? Trade small and manage the winners.

See you next time at the Corner!