Market Journal: 1987 Still on the Mind

Discussion

Bulls can take heart that it appears central banks are working over time to prevent the fundamental collapse in equities that fundamentals say should occur. This weekend the Fed coordinated with the BOJ to smooth out the on-going adjustment in BOJ monetary policy, and equities responded by gapping higher this morning and largely holding their gains alongside a fall in credit default swaps.

The problem for bulls is that negative divergences continue to pile up across the cross-asset spectrum, TIPS break-evens are moving higher on the back of a weakening USD, and the 1987 analog continues to hold.