01Apr10:54 amEST

Yield Curve Inversion: Don't Make a Production Out of It

I see the yield curve inversion-as-recession-indicator made the front page of the DrudgeReport.com, as well as being on the tip of everyone's tongue in the financial media, not to mention social finance (for more discussion what inversion actually is, see here). 

From the standpoint of being a speculator and/or investor, it is worth noting the pronounced lag time from when inversion happens to when the recession officially begins. During that time lag (and in some cases even after it), stocks are capable of acting in a variety of surprising ways. Specifically, the late-stage cycle boom in commodities and sectors like utilities can often drag on for extensive periods of time. 

As an example, I bet you did not know that when the yield curve inverted in August 2006, it was several months before First Solar IPOd. The domestic solar firm went out to be a ten-bagger after its November 2006 IPO, leading up to the top of the commodity bubble in the summer 2008--My point is that opportunities in late cycle sectors may still abound. 

Hence, in lieu of getting too worked up about the inversion this time around, my focus is on whether commodities and their stocks continue to operate in uptrends and continue to resolve dips and consolidations higher. As for tech and growth, April is often a strong month for stocks. So, bears need to keep an open mind to a scenario where we perhaps form a range on the Nasdaq until we get to the rougher seasonality in May. 

As for this morning's action, note coffee trying to break a bull wedge pattern higher this week. Volume this morning is running strong for an otherwise thin ETN. 

Looking Out to April and the... Weekend Overview and Analysi...

 
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