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Keep a Close Eye on These Three Trends this Month

By Jeff Clark
Tuesday, June 4, 2013

 Last month, we took a look at three trends that appeared ready to spike higher in May. Let's take an updated look at them today and see what June might bring...
We figured May would be a tough month for bond investors. And it was. Interest rates on the 30-year Treasury bond spiked from 2.85% to more than 3.3%. It was the largest one-month spike in interest rates in the past four years...
Here's an updated chart...
30-Year Treasury Bond Yield Spikes
The move is a bit extended right now. So rates should come back down a bit over the next few weeks – especially if the broad stock market continues to weaken. Investors might flock to the perceived safety of Treasury bonds to avoid the risk of the stock market. That will push bond prices higher and force interest rates a bit lower.
 We were also looking for an increase in volatility. Periods of low volatility are always followed by periods of high volatility. So with the Volatility Index (the "VIX") trading below 14 at the start of May and remaining low through the middle of the month, it looked overdue to spike higher. Here's an updated chart...
Volatility (VIX) Starts to Rise (2-Month Chart)
The VIX didn't hit the 22 level we were looking for. But it is well off its lows and significantly higher for the month... And I don't think we've seen the end of this move. The VIX hit a high of 27 last June when the market sold off. It rose above 47 in July 2011. So there's still plenty of room for volatility to increase this month.
 Finally, we were looking for gasoline prices to bottom in May – about one month earlier than they did in 2011 and 2012. Here's the chart...
Gasoline Hits a Higher Low in May
Sure enough, gasoline prices bottomed in early May. We haven't yet seen a huge bounce off the bottom. But it looks like the chart has formed a "higher low." In each of the past two years, gas has rallied through the middle of summer. I expect we'll see something similar this year as well.
– Jeff Clark

Further Reading:

Jeff is also calling for an end to the year's most popular trade... As he notes, "popular trades have a habit of blowing up." He got this call right in 2012... and 2011. See which trade will make three in a row right here.
You'll find originals of all the charts Jeff references today right here.
And you'll find four more charts to watch right here.

In The Daily Crux
Market Notes
Bonds are quietly breaking down... big bond-market fund BND falls to its lowest level in nearly two years.
"Fear index" VIX jumps to a six-week high.
After nearly doubling in six months, Japan's Nikkei index plunges 19% in less than two weeks.
Gold and silver are on sale... both are down 18%-plus over the past six months.
Market Watch
Symbol Price
S&P 500 1627.31 -0.2% +27.3%
Oil (USO) 33.16 +1.7% +5.5%
Gold (GLD) 136.58 +2.0% -13.3%
Silver (SLV) 22.06 +2.9% -20.1%
U.S. Dollar 82.55 -0.9% -0.3%
Euro 1.31 +0.8% +5.4%
Volatility (^VIX) 17.45 +7.1% -34.6%
Gold Stocks (^HUI) 282.36 +2.8% -36.5%
10-Year Yield 2.10 -2.8% +42.9%

World ETFs
Symbol Price
USA (SPY) 163.05 -0.2% +30.1%
Israel (ISL) 14.90 +0.1% +27.9%
Japan (EWJ) 10.61 -2.1% +25.2%
India (IFN) 20.95 -0.2% +24.6%
Singapore (EWS) 13.69 +1.2% +25.9%
Taiwan (EWT) 13.77 +1.0% +21.1%
Canada (EWC) 28.02 +1.1% +15.2%
China (FXI) 36.35 +0.9% +14.2%
S. Korea (EWY) 58.50 +1.5% +14.4%
Russia (TRF) 14.21 -0.2% +12.8%
Lat.America (ILF) 40.41 -0.2% +5.8%
S. Africa (EZA) 59.76 +1.4% +0.6%

Sector ETFs
Symbol Price
Construction (PKB) 19.78 -2.6% +60.3%
Media (PBS) 20.36 -1.5% +51.2%
Biotech (PBE) 28.84 -3.3% +39.1%
Financials (IYF) 72.01 -0.9% +43.3%
Defense (PPA) 24.50 -0.9% +38.5%
Health Care (IYH) 100.84 -0.4% +38.6%
Alt. Energy (PBW) 5.33 -2.4% +32.4%
Consumer Svcs (IYC) 101.64 -0.7% +34.7%
Water (PHO) 22.76 -0.6% +33.8%
Industrials (IYJ) 84.19 -0.7% +33.5%
Retail (PMR) 30.35 -1.7% +29.6%
Telecom (IYZ) 26.02 -0.7% +29.0%
Transportation (IYT) 111.26 -1.0% +27.5%
Software (PSJ) 29.74 -1.8% +20.9%
Big Tech (QQQQ) 72.47 -1.1% +21.5%
Insurance (PIC) 19.01 +0.1% +18.3%
Basic Mat (IYM) 71.48 -0.6% +19.0%
Real Estate (IYR) 68.84 +0.2% +19.8%
Nanotech (PXN) 7.02 +0.0% +20.3%
Semis (PSI) 16.00 -1.2% +17.4%
Utilities (XLU) 37.94 +0.7% +10.5%

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