Bonds Agree, Risk On

Markets continue to rally strongly on hopes for a permanent solution to the middle east conflict. Rather than simply judge the trend of equities, it is very helpful to also monitor the bond market’s opinion. Though most investors will study US government bonds, a more helpful market to monitor is High Yield (HY) bonds.

HY bonds do the best job of representing liquidity flows into financial markets as it represents both demand for bonds and risk concerns. A simple way to monitor liquidity is to study the trend of the JNK’s 20 ema. You will notice that the 20 ema had begun trending higher several days ago, confirming a genuine improvement in financial conditions supporting stocks.

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Healthy Beneath the Surface

Though the advance decline line is most widely followed as a measure of market breadth, analyzing 52 week highs vs. 52 week lows or Net Highs/Lows, can often display a less noisy view of the general market. True bull markets are associated with more stocks making 52 week highs vs. lows.

In the chart below you can see the Nasdaq composite has now delivered six straight sessions of Net Highs, confirming this rally is more than a bull trap.

Up Trend, Short Term Extension

Though yesterday and today we have discussed multiple reasons why the market has shifted into an uptrend, having rallied 8 out of 9 days has resulted in the market showing objective signs of short term over extensions.

The Vix is often a great check on the S&P 500. This powerful rally has resulted in the vix closing below its bollinger band. A rare signal typically associated with at least some market pause.

Recent IPO Leads Higher

Following up on yesterday’s AI discussion, companies providing the picks and shovels of this tech revolution are seeing massive demand. NBIS is a recent IPO focused on building AI specific cloud infrastructure allowing AI projects to ramp into production more quickly, efficiently and cost effectively that traditional cloud providers.

NBIS has broken out of a six month cup with handle pattern and is trading at all time highs.

A Mature Stock Riding a New Wave

Though Corning (GLW) is one of the oldest American companies, it continues to reinvent itself along with new demands for glass. Much like the 1990s (a reminder to read our 1996 precedent from yesterday’s Market Mosaic), GLW is seeing surge in demand as AI focused datacenters upgrade to GLW’s latest fiber/optical cables as new tech needs faster data transmission speeds.

GLW broke out of a recent symmetrical triangle and sits at all time highs.

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