Below are the stats related to buy signals that lasted more than 50 days. We can see that the strongest signals were in 2009, at the start of the bounce, with daily S&P500 gains higher than 0.15% on average. As a reference, the S&P500's daily gain since March 2009 has been 0.09%.
It is strange to see that so late in the bull market the current buy signal carries a daily gain of 0.1%, which is 10 times the average.
In fact, as far as QE unwind is in motion, fixed income assets will be sold together with Treasuries, money rotating into large caps equities.
We really cannot escape from such a consequence of the market frontrunning the QE unwind. The narrative is focusing on the Tax deal which supports investing into equities due to improving corporate earnings. Hence, pension funds and all the big money can justify investing in equities, even at such lofty price levels. The real issue is however investors running out of fixed income assets.
However, not everybody is running out of US Treasuries. We can indeed see below that the US/Japanese rates differentials are still increasing. This means that Japanese pension funds are still interested into buying US Treasuries.
As a matter of fact, the rates differentials just broke out, while the US$/JPY exchange rates did not break down. This means that it is even more interesting now for Japanese pension funds to invest in US Treasuries.
conclusions:
All the CBs printed money has to find a home. For now, it is equities and nothing else.
As far as rates differentials attract foreign money, Treasuries auctions will easily find buyers.
At what interest rates levels will it be safer for US investors to rotate back into US Treasuries?
