E Who's Buying?

(Reuters) - While stocks hog the limelight with their best January in three decades, another corner of the risk assets marketplace sprang back to life last month after having taken a pounding at the end of last year, though some investors question whether the recovery has legs.

Junk bonds in January delivered their strongest monthly performance in more than seven years with a total return of nearly 4.6 percent, according to ICE BofAML index data, retracing almost all of the fourth quarter’s losses. Issuance of new debt rebounded after a near-complete shutdown in December.

10-Year Treasury Notes pulled back from Thursday’s high at 122.80, consolidating near Intermediate-term support at 121.99. The Cycles Model calls for a possible over the next week or longer which, in all probability, may find support near the mid-Cycle area.

(ZeroHedge) One day after a surprisingly strong 3Y auction priced, stopping through the When Issued for the first time after 10 consecutive tails, moments ago the US Treasury sold $27BN in 10Y paper in what can only be described as a poor, sloppy auction, which stopped at 2.689%, which while the lowest yield for a 10Y issue since January 2018, tailed the When Issued 2.681% by 0.8bps.

The internals confirmed the weak nature of today's auction, with the Bid to Cover sliding from 2.51 in January to only 2.35, which was tied with the lowest since February 2018; it was also well below the 6 month average of 2.49.

Finally, looking at the buy side, there was a distinct lack of enthusiasm by foreign buyers, with the Indirects taking down just 59.5, which while above last month's weak 56.9%, was below the recent average of 63.9%. At the same time, the Direct bid tumbled from 20.8% to 12.2%, the lowest since December if above the 10.5% average, which however was dragged down by November's surprisingly low 1.2% takedown. Dealers were left with 28.4% of the final allotment, the highest since October.

The U.S. Dollar may be just days away from another Master Cycle inversion (high). The Cycles Model suggests a substantial pivot may occur within the next week. Today appears to be the last day of strength for this Cycle, so incremental new highs, if any, may be small. 

(Investing.com) - The greenback rose to an almost one-and-a-half-week high Tuesday even as services sector data slowed to a five-month low in January.

The Institute of Supply Management said its non-manufacturing purchasing managers’ index (PMI) fell to 56.7 from 58.0 in December, as worry over the impact of the government shutdown weighed on businesses.

But Friday’s upbeat jobs numbers, along with ISM manufacturing data, helped ease concerns of a slowing economy.

The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, increased 0.23% to 95.79 as of 10:58 AM ET (15:58 GMT).

--The Yen declined to a Master Cycle low on February 4. The next move appears to be a rally to the Head & Shoulders neckline near 93.50 and its subsequent target. If the Cycles are correct, there may be an extended rally that could last up to 6 weeks.

(Bloomberg) As investors adjust to the prospect of a slowing global economy, JPMorgan Asset Management is turning to the yen for protection from an uncertain outlook.

“The yen has the attraction that it’s still very cheap versus its history,” Olivia Mayell, managing director, multi-asset solutions, at the $1.7 trillion investment firm, said in Sydney. “Our fundamental view is that it does get a little bit stronger from where it’s been regardless of market stress. It’s one of the cheaper hedges you can put in the portfolio today.”

The Nikkei appears to have completed its retracement on Tuesday. A breakdown Intermediate-term support at 20616.21 puts the Nikkei on a sell signal.  The Cycles Model calls for the decline to last up to two months. 

(Reuters) - Japan’s Nikkei edged up on Wednesday with markets barely reacting to U.S. President Donald Trump’s State of the Union address, while attention remained on corporate earnings.

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Disclaimer: Nothing in this article should be construed as a personal recommendation to buy, hold or sell short any security.  The Practical Investor, LLC (TPI) may provide a status report of ...

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