The 20-yr US long bond is, unsurprisingly, staging an oversold comeback. Following that strength, interest sensitive stocks like utilities, pipelines and REIT’s are bouncing. If you’ve been following this blog or watching my BNN appearances, I emphasized that potential a couple of months ago. The question is, will these sectors continue to rally?
My take is that it’s a short-termed trend that might continue to have legs for another month or two. While the charts for Canadian utilities (left chart – below- breaking a downtrend) and US utilities (right chart- below- breaking out of a triangle) are bullish, momentum indicators are overbought for these sectors. Canadian REIT’s, in the above chart along with the US long bond on the top chart, are running into some near termed resistance. Further, comparative relative strength, which is the bottom pane on charts I’ve posted, is only marginally strong for all of these charts. So, enjoy the rally, but look to rotate out of the least desirable sectors if and when the party looks to be ending.
Keith on BNN
Lots of heads-up on this one–I’ll be on MarketCall Tonight on Tuesday November 5th at 6:00pm. That’s about 2 weeks from now.