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Quarterly Market Update: Indicators of a January Sell-Off

The Major Finance Headline so far in 2016 thus far has been the Sell-Off of Equities, as the S&P has pulled back about 8.80%.

What’s interesting is that the Bond Market Activity the last 45 days of 2015 illustrated a common pattern that indicated a weakening in the Equities market, almost an indicator of this sell off.   Again, a strengthening Bond Market means a flight to safety from other more risky securities, like stocks.  As Demand increases, the Bond Issuers are still able to attract buyers with lower rates.

In the Chart below of TNX (10 Yr Treasury Bond ETF), we see a pattern of lower highs starting in November into December, as the red lines indicate. You can also see a similar pattern in June-July of 2015, as a precursor to bond yields pulling back thereafter.

Chart 1-18

What does this mean?

 It means that rates are still very low right now.  Those purchasing homes or refinancing existing loans have the ability to get to some of the lowest rates we have seen over the past 10 years.

For Stock Investors, some are seeing this as an opportunity to dollar cost average and are gobbling up shares at a discount.   Obviously, the stock market could continue to pull back from this level, and many others are watching cautiously to see what happens from here.

We are in a very interesting Economic Period of Time right now.

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