Friday, May 10, 2013

T2 Commodities on Downturn...5.10.13

The T2 Commodities model has been under pressure recently as can be seen by the metrics.... which was forecast by the downslope P6 on the 4 month chart...especially the cross of the P6 and the RSQ back on 5/1. 
Commodities in general are showing weakness with only IYR (real estate) and XLE showing positive P6/RSQ alignment out of our 11 ETF portfolio.  The sector is clearly under selling pressure.
Weakness generally begets more weakness when we see this ominous cross and risk management guidelines argue that going to cash during such situations is the prudent course of action.  Yes, we incur some trading costs while we await a new upslope P6, but the drawdown savings can easily make up the difference.

The big loser in today's action is bonds, especially 20 year treasuries...TLT...which is currently down 1.75% just 2 hours in.
TLT has been in freefall since 5/3 ...losing $6 in as many days. 
Previous February support was at the 115 level ..another $3 down from the current $118. 
This is not a good time to be bottom fishing TLT...or bonds in general.
Ditto for commodities.