The next chart is Barclays TIPS Bond Fund (TIP) over Barclays 20 Year Treasury Bond Fund (TLT). This pair does a nice job of tracking inflation expectations, as well as positively correlating with risk asset markets. The TIPS Treasury auction proved disappointing after commodity markets dropped a few weeks back. The overall sentiment around global inflation, even in the face of robust central bank intervention, has deteriorated. The pair did break lower, bringing equities down with it slightly, but nothing that meaningfully altered equity markets' intermediate upward trend. The pair appears to have hit a bottom for now, which could make a further rise in risk assets next week, above record highs, even easier.
The last pair is of Materials Select Sector SPDR (XLB) over S&P Equal Weight ETF. This pair has shown clear relative weakness in recent weeks. Although equities as a whole didn't fall with commodities and lower inflation expectations, the material sector did. Tepid industrial production and fear of falling global demand hurt the sector. This pair appears to have hit a bottom, and with a looming breakout in XLB, relative strength could propel materials into the mid-40s. This cyclical sector is one to watch as equity markets push toward new highs.At the time of publication the author held no positions in any of the stocks mentioned. This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
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