FSInsight subscribers hopefully received my technical update Friday afternoon. Given the market sell-off this week, I wanted to provide some perspective on what I saw developing technically. I won’t rehash the full note, but I do want to highlight one of the more complicated, some would say noisy, charts I included in the email.

Interest rates remain a lightning rod for many of the trends and distortions we see in capital markets. Negative real rates, the difference between nominal yields and inflation, have fueled the surge in low volatility assets, growth stocks and gold. This week’s chart illustrates the trend in US 10-year real rates since March which is clearly down with a series of lower highs and lower lows.

Real rates undercut the August 6 lows (-1.11%) on September 9 (-1.12%) BUT have since rebounded. Interestingly, growth stocks began to sell-off as real yields began to firm this week which is a relationship we want to monitor very closely going forward. Granted, it’s very early to conclude an upside trend reversal is in place which would require a move above the prior highs at -.9475%.

However, note the daily RSI momentum indicator (second panel) is positively diverging with higher lows while real yields made lower lows. Again, it is very early to draw ...

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