Let's talk about bonds, because there doesn't seem to be a soul who thinks bonds are a buy here and yet they keep going up.
Then there is the actual chart of yields on the 10-year note. Look at the breakout two weeks ago. It looks like a false breakout, doesn't it?
Or is it possible that this recent pullback will result in forming the right shoulder of a head-and-shoulders bottom?
Quite frankly, I have found that the utilities have been one of the best tells for bonds recently. Just notice how the utes bottomed and rallied in early October while bond rates kept going. As yields were breaking -- or really faking us out -- two weeks ago, the utes were nowhere near the lows but rather probing the highs.
And then last week we saw the big giveback in bonds. It's not just that one time either. Look at the big rate rise in late June/early July. Utes were bottoming and rallying. Then we saw that two-month slide in rates.
Utes have kissed right up against the previous highs and seem stuck, even when rates came back down last week. At the very least, I think the utes will test that uptrend line (call it 740), but I am more interested in that I believe they might actually break that line in the coming weeks.
If the utes manage to break that line, then I would have more confidence to believe the bonds are forming a right shoulder of a head-and-shoulders bottom (in rates). Right now I see bond sentiment as fairly neutral, but we'll keep an eye on it.
The place where sentiment has again gotten giddy is oil. The Daily Sentiment Index (DSI) for crude pushed to 94 on Monday. It's hard to be bearish yet, though, because there is still a measured target on crude oil just over $60. It could sure use a pullback to cool it off a bit, though. Or at least some sideways action.
Perhaps if oil does reach the measured target area in the low $60s, folks might actually get concerned about inflation.
In the meantime, the stock market had another day of meandering, but at least breadth improved. Hey, it was positive by nearly 500 issues! It's going to take some positive breadth readings to get the Overbought/Oversold Oscillator up off the mat. As you can see, on Monday the NYSE's Oscillator finally lifted itself back over the zero line. Nasdaq is still struggling to do so. I think Nasdaq's oscillator will get over the zero line this week.
For more market analysis from Helene Meisler, sign up for Top Stocks, published five times a week.