You've seen this in cheesy Western movies: an armed standoff that often begins with some variation of "This town ain't big enough for the both of us."
That's where we are now with stocks and bonds. And we're rapidly approaching the point where the town ain't big enough for either of them.
The U.S. Treasury continues to pound the market with massive amounts of new supply, but Treasuries held their own this month and even rallied a bit.
Instead, stocks caught it in the neck.
So what's happening? Nothing good…
It's a simple question of liquidity, or, more specifically, the lack of it.
As I've been telling my Sure Money readers, there's no longer enough liquidity in the system to support bullish moves in both stocks and bonds.
If one rallies, the other must be the source of funds for that rally. So in March, stocks were the liquidity sink that supported the rally in bonds.
And don't be fooled by events like we saw this past Thursday, when there were rallies in both stocks and bonds: Neither baseball, nor life, nor markets move in a straight line. They are full of surprises.
But those surprises happen in the context of a broad arc. And right now, that arc is pointing down.
The rapidly deteriorating momentum in stocks and bonds tells us a lot about the bear market I see around the corner.
About the Author
Financial Analyst, 50-year charting expert, finance + real estate pro, and market analyst; published and edited the Wall Street Examiner since 2000.