If Today's Stock Surge Means Economic Strength, Why Did Electric Utilities Defy Weakness in Treasuries and Instead Break out to a Nearly 4-Year High?

On a day when Treasuries sold off sharply due in large part to simple profit-taking, it felt wrong to see the XLU (Utilities ETF) move up with the SPY tick-for-tick and close at a 45 month high.  My take is that investors are simply moving into the lagging safety-income vehicles and away from the (allegedly) super-safe govvies such as bunds, gilts, and Treasuries.  As I have been saying for some time, Con Ed ED is as good as it gets for me right now.  Strange though it seems, at its current almost 4% current yield, a 15% price move higher is entirely reasonable if we assume that the 30-year T-bond yield moves back to 3%.

Meanwhile, the S&P 500 150 day sma has just begun to point downward, with the index marginally below that line.

Also consistent with a topping process is Uncle Warren coming out to say there's not going to be any stinking recession.  And in the unlikely event there will be one soon, it's the fault of some other people (i.e., the Europeans).  Meanwhile, a pitiful few percent of U.S. GDP comes from exports to Europe, very little of that will be lost should Europe's economy get worse, and there's an offset as diminished economic activity in Europe means lower prices for imported oil and other imported goods into the U.S.

An awful lot of people such as Doug Kass are locked into the no-2012 recession camp.  (Recall that he put the risk of such an event at zero a few months ago.)  I dunno, but it is more than 4 1/2 years since the last recession began in the U.S. and 3 years since it ended.  All precious metals, copper and (sort of) oil are in bear markets.  Interest rates plumbed multi-decade lows-- which cannot possibly happen in the absence of agressive QE unless there simply is not much demand for credit.

Regular readers know that starting in early May last year, I have been emphasizing safety, and switched to a U.S.-centric investing posture.  (See Changing on a Paradigm from May 9.)  At that point or soon after, I was long gold and Treasurys; no more stocks or oil/silver:  pure safety.  Then I got more liberal as it became clear that the U.S. really was the "best house" in a challenged global neighborhood.  (See Gold on Hold; The New Play May Be in Munis from Sept. 25 -a Sunday.  Weirdly, gold closed the next Monday almost exactly where it closed today.  Talk about truly having been "on hold"!)  Since then, the leveraged muni fund NIO has paid out about 4.5%+ in tax-exempt dividends and has appreciated about 5% in price- and to me the key is, considering NIO and its peers vs. stocks, that this followed after a substantial uptrend in NIO and a severe correction in stocks. 

This I continue to see matters as laid out in my April 15 post, More Signs Of a Stock Market Topping Process Emerge.  The interesting and hopeful phenomenon that strength in electric utilities may just presage a non-catastrophe, merely an "ordinary" down-cycle should indeed the top be in already and a lower low await.