The question was whether the market was consolidating at the top prior to a push higher, or instead making a top. Yesterday there was some buying at the close but on weak volume. Today there was selling at the close on stronger volume. As several have noted the yield on the 10 year note is rising and the European central bank is maintaining its hawkish stance on rates. I and others posted elsewhere in this forum, several months ago, the reasons we thought it more likely that 2007 would bring a Federal Funds rate increase rather than a decrease, and i see nothing to dissuade me from that view. The increase in labor costs noted are important and still another bearish sign.
Unlike some here, i don't know what will happen, but i think it increasingly likely we will see a good- sized correction this summer, and perhaps this is the start of it.
Re the labor cost- core inflation graph posted, i think by "Convertibility," the correlation value for the shorter 1995-2006 period is not reliable because of the large variance in the labor data. Only the correlation figure from the much larger data set of the 46 year period is meaningful. Just eyeballing the graph, however, it appears the correlation is being maintained at roughly the same level as for the longer period.
Unlike some here, i don't know what will happen, but i think it increasingly likely we will see a good- sized correction this summer, and perhaps this is the start of it.
Re the labor cost- core inflation graph posted, i think by "Convertibility," the correlation value for the shorter 1995-2006 period is not reliable because of the large variance in the labor data. Only the correlation figure from the much larger data set of the 46 year period is meaningful. Just eyeballing the graph, however, it appears the correlation is being maintained at roughly the same level as for the longer period.
