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Monday, January 25, 2016

Charts - $bac

BAC breaks up tomorrow, investors get $15.60. (Yeah and this models $30 crude for a few months! But the "super-smart" chatter-heads dont buy it.)

As the market goes, so did bac. Its down with the rest of the market since Jan 1st.

Why? Correlations.

Financial stress rises, flight to safety. Banks go down, treasuries go up (yields go down).

Why? Stupid junk bonds.

Why are junk bonds going down? Stupid oil. 

Crude stays near $30, defaults will hit. I shrug my shoulders cause its no different than any other market shaking out the unprepared players. Thing is, junk has not correlated well with the spy. It obviously out performed, and now its under performing. The XLF on the other hand clearly is correlated.

So go financials, so go the markets. Or Vice versa whichever you prefer.

More corelations, bac vs $tnx. 

Clearly there is a disconnect here. How dare bac lose its corelation to the 10yr!

The most important economic data point right now is the rate of oil supply. How much is taken off line as consumption remains steady given global gdp expectations. A curious thing happens to a commodity when suppy reduces and demand keeps rising. This go around it will stem the junk bond defaults, reducing financial stress, inflation starts to pop up, treasuries rise, the banks rise, SP500 earnings level off thanks to energy names and markets rise.

Also, wonder where the $1TRILLION outflows from china will end up. Seems like they are choosing treasuries, maybe they should look to bac :).

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