| Oct 31, 2012 01:56AM ET
The markets have been influenced by a number of factors lately, so it is only fair to highlight a sizeable quantity of charts to explain. The transition from a central bank driven- to an earnings-driven market has commenced, and the performance has been uninspiring.
Revenues have consistently come in weak, which can be expected in an environment as is seen today. Domestic GDP did not disappoint, but it is not at point that it can meaningfully diminish unemployment. Europe is still a mess, a more organized mess, but a mess nonetheless.
The farther we move from the date of the QE3 announcement, the closer we come to the election and impending "Fiscal Cliff." Both of these events incite volatility and keep market advances to a minimum. The central bank "put" is still in effect, limiting downside, but with a lack of upside momentum, sideways movement looks to be the tone.
Below is a chart of commodities (DBC) over intermediate Treasury notes (IEF). This indicator advanced and spiked leading up to the announcement of worldwide easing, but has since done nothing. It has broken its trend, and maintains sideways action. The inherent weakness is a sign that easing has capped our losses, but will not do enough to create sustainable belief and risk sentiment.
Volatility is expected with the upcoming election and "Fiscal Cliff," so do not be surprised to see this indicator stick to its trend.
The euro, being a risk trade, has caught a consistent bid for a better part of three months. The indicator has reverted back towards its trend line recently with speculation around both Greece and Spanish outcomes, but there has not been a substantial break as of yet. Look for the movement of this indicator over the next few weeks to guide markets.
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