For the past few years we have been watching TIPs, or the tight correlation between the 10-year TIPs spread (the market’s inflation expectations) and the S&P 500 index. We currently have a divergence in place, if you believe they have been correlated in that time.
While we know that equities have rallied, TIPs are beginning to roll. On the weekly chart below, we have what looks to be a bear flag breakdown threatening here. We know that divergences can drag on for much longer than seems possible. Furthermore, bulls are sure to argue that TIPs cooling off is probably a good thing.
What do you think? Relevant? Non-factor? Warning sign? Feel free to chime in below in the comments section.
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Sold $IPE this morning.
Visited a big bear blog last night. He says TLT is his largest short position. I think we all know the bond market is a terrible investment long term.
if he wants to be short, shouldn’t he buy TLT? TLT down stocks down?
Bearish on TLT usually means you are bullish, unless you think the entire market is getting “unhinged” from the correlation.