The VIX has been in the low 13 area for many days and on past precedent the VIX should be rising shortly, indicating that traders are predicting rising volatility ahead. But what will trigger rising volatility -- a sudden advance in stocks or a sudden decline? Nobody knows.
I keep turning to the bond market for information. Bond traders tend to be more sophisticated than stock traders, and when the bonds "do something" it pays to watch and ask questions. The talk of the investment world has been the huge gains in US Treasury bonds, as you can see on the chart below.
What's happening? In a sentence, I believe the bond market is discounting deflation. In deflation, the best stance is to be in safe and stable items that throw off interest or dividends. Money and income are more valuable during periods of deflation. Thus, best quality bonds tend to advance ... Log in or subscribe to continue reading.
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