Double V Correction Now?

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“I respectfully decline the invitation to join your hallucination.” – Scott Adams

Last week, several indicators began flashing warning signs for the bulls, suggesting conditions are no longer favoring near-term upside in stocks.

There are a few things I’ve been recently noting on my Twitter account (@pensionpartners) which are concerning. First, consider that the vicious V off of the December lows in the S&P 500 has not caused a significant breakdown in Utilities or Treasuries, both historically leading indicators of volatility. As a matter of fact, Utilities have been oddly strong relative to all other sectors against their respective moving averages.

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When it comes to Treasuries, the real issue here is that inversion just doesn’t want to go away.

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I know everyone is concerned about yield curve inversions.  And for good reason.

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The problem with any analysis like this of course is that while every recession may have historically been preceded by an inverted yield curve, that does NOT mean that an inverted yield curve always precedes a recession. I have no clue if we are entering a recession or not. Personally, I’m not convinced as I believe thematically reflation this year is more likely than not. However, in the very short-term, there is a lot of intermarket movement which is troubling and may be suggesting the V is over. While this may or may not be a “bull trap,” it is worth considering that history suggests violent moves off of lows like what we just experienced have happened before, and ultimately were followed by more significant declines.

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This writing is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction, or as an ...

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