Authored by former fund manager Richard Breslow via Bloomberg,

This year has given us some impressive moves. Equities come to mind, with some tortuous moves that have frustrated both bulls and bears. Ten-year Treasury yields certainly fit the description.

There have been assets that have defied expectations. The dollar, hanging in as well as it has, goes into that bucket. And trades that simply worked without a great deal of drama. Emerging-market currencies have done that despite being a very popular expression of risk. While the price action doesn’t fit the story line, it makes plenty of sense in retrospect. The BTP-bund spread is a poster child for this.

Of course, I would be remiss not to mention the profound shift from central banks, especially the Fed, to a dovish stance. The word they prefer to use is “patient”. That’s a euphemism. What they really mean, but can’t say, is “wary.” Which should, and maybe at some point will, add a modicum of caution to investor behavior.

The extreme tightening of financial conditions in December has been eliminated by the extraordinary loosening so far this year. So perhaps it isn’t such a bad idea, in order to provide a little context, to look back to where things stood before the zig and the zag.

Of course that’s a little misleading now that we have a completely different perception of what global rate-setters are thinking. Not to mention, commodity markets looking quite a bit different. Oil is grinding higher rather than in free fall. Which certainly has to be taken into account when judging whether things like high-yield and emerging-market credit spreads can continue to narrow.

Nothing is ever just the same as it was. Time marches on. I do have to say, that it would take a pretty sharp pencil to draw a chart that says these moves have run out of steam. But if I had to, well, you know I could. But it is of the canary in the coal mine sort.

So what are my big questions?

It isn’t whether the S&P 500 will manage to punch through resistance or keep stalling near 2800. For all the strong feelings on the subject, it has actually done nothing so far this week. So how it finishes out is really the interesting issue. The funny thing is, that despite last year’s 20% range, it has essentially gone nowhere since mid-March 2018.

First and foremost at the moment, I’m watching global bond yields.

The change in mood from even the beginning of the week is nothing short of extraordinary. Such is the technical prowess of reaching the narrow point of descending triangle patterns. My guess is the big driver is yield-curve flatteners being liquidated and flipped. Nothing like rate-cut expectations replacing hikes in traders’ minds.

There are a fair number of chartists suddenly arguing that not only Treasury yields, but German, French, Australian, even Chinese 10-year yields have put in potentially significant bases. This is big news. And no bond market is an island.

The price action for emerging-market currencies also warrants close scrutiny. They’ve done nothing wrong except to run out of steam altogether. It’s not that they are obviously failing in any meaningful way, but you look at them and say, meh. It remains an incredibly well-subscribed trade. Today’s low for the MSCI Index will be a good pivot to key off of.

The dollar itself is doing its best to break my spirit. It gets the day off. I find most of the commentary surrounding it uninspiring. And unconvincing. So instead I’ll spend the time watching how gold trades as it continues to sell off into major support. But at the end of the day, it will be all about yields