The Kirk Report

As The Worm Turns

That was an ugly day. They bulls tried their best to rally us in the final hour but that effort fell dead flat. Increased volume, technical breakdowns, and the failure to rally not far from the lows were not comforting.

Along with yesterday's triple sell warning from Morgan Stanely, Bill Gross stepped up to the plate this afternoon and declared that bonds are now in a bear market. Gross now thinks the 10-year Treasury bond could reach 6.5% within the next 5 years. Clearly, as Wall Street shifts their perception from interest rate cuts to the possibility of hikes, the reverberations are widespread and providing an excuse to sell and take profits. Nothing makes the market more concerned that the idea that rates are going higher especially when interest rate cuts were all but assumed just a couple of weeks ago. Of course, all it will take to calm things down is a better report on inflation. Unfortunately, the next opportunity for that won't come until late next week with the release of the PPI and CPI.

I hope that you and your portfolio are faring well and that the risks you've taken are acceptable no matter which way the worm turns next. No matter what, that is always the most important thing. See you in the A.M.

Watching For Clues

Good morning. The negative tone that we've seen this week remains. A rise in bond yields above the 5% threshold have increased worldwide liquidity and inflationary concerns. Investors are also paying close attention to same store sales data along with energy prices but so far are not being overly receptive.

Investors have been going with the flow and buying every dip so we'll get yet another opportunity today to see if that behavior continues. The bulls have been dominant on Fridays throughout this rally so both today and tomorrow are fairly important in order to determine if the rally remains intact. Those of you looking for a sign that the rally is finished should be watching for clues that good news in any form (like more M&A activity for example) is ignored and overlooked by the market. We haven't really seen that yet. What we have seen is a loss of momentum amid relatively uninspiring headlines this week and given the rally we've seen, that's fairly typical.

Have a great day!