“Risk On” Is Still a Go

There are many gauges one can use to the determine the environment and sentiment of the market. Looking over some of those “gauges”, it is obvious “Risk On” is still a go.  Many traditional “risk-on” assets are showing no signs of weakness, and one major “risk-off” asset is in turn showing weakness. This rally is far from over as long as these “gauges” continue to show the proper signs.

 

The Charts

(All Daily charts)

Copper ($HG_F, $JJC)

A traditional tell when it comes to “risk-on”. Higher copper prices tend to correlate with strong demand from a global economy (especially China), which is bullish. As you can see, we are sitting near multi-month highs.

 

 

 

Australian Dollar ($AUDUSD, $FXA)

Here’s the main Forex tell for “risk-on”. The Aussie Dollar correlates with commodities which are viewed as “risk-on” assets. We just made a new multi-month high a couple of days ago.

 

 

Japanese Yen ($USDJPY, $FXY)

The Yen is a risk-off asset. When the $USDJPY is getting weaker (as it did from April to Nov of last year), there is a bid for risk-free (or low risk) assets (like the Yen). While the BOJ has been involved with FX intervention, the rally (which means the Yen is getting weaker compared to the Dollar) over the past month has been real impressive. The Nikkei $NKY (Japan’s Stock Market Index) also has been rallying hard Year-to-date, which confirms there is some type of bid for Japanese risk assets.

 

 

Italian 10-year Bond ($EWI)

Here’s a great tell on why the market is still in risk-on mode. The 10 year fell below 5.0% today! That is incredible considering everyone was so sure Italy was going to implode a few months ago.

 
 
 
  
 
 
 

 

 

 

 

 

Note: It’s hard to use US Bonds ($ZB_F,$TLT) here as a gauge for risk because of the abnormal characteristics it has been showing YTD (due to a number of reasons).

 

Tags: $USDJPY $EWI $MACRO $AUDUSD $FXA $FXY $JJC $HG_F 

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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