In the chart below, the curve has already begun to fall back toward its trend line. If nonfarm payroll numbers disappoint this week, look for this pair to fall more and the curve to flatten considerably. The last chart is of Guggenheim S&P 500 Equal Weight ( RSP) over SPDR S&P 500 ( SPY). This pair represents market breadth in the S&P 500, the level of participation during equity index moves. As the pair rises, it signals that a majority of the stocks in the index are moving higher as well. U.S. equities remain the most attractive stocks in the world , which means that if equity markets as an asset class move higher, this pair should lead the way.
Volatility has been introduced to markets these past few weeks as questions over monetary policy all over the world have arisen. Investors sold off higher risk assets such as equities due to this uncertainty. Although equity markets did drop from their highs, the market was vastly overbought. Analysts had been calling for a downturn the past three months. With such fragility, any news was sure to incite a selloff. So the markets have merely corrected from oversold levels. Our economic picture has hardly changed, and if the Fed really is set on changing policy depending on the economy, then we should not see tightening until markets can truly sustain themselves. At the time of publication the author had no position in any of the stocks mentioned.Follow @AndrewSachaisThis article is commentary by an independent contributor, separate from TheStreet's regular news coverage.