We must admit that we held our breath over the last few days! It seemed as if Friday was going to be the tipping point as many analysts had pointed out. The media in its various shapes and forms were not going to let the Dubai World default go and played it for all it was worth! But oh how they were proved wrong again for the umpteenth time this year!

On Friday as the market opened rather dramatically down the bulls came out of the gate with passion and enthusiasm! Across the board markets repaired themselves to close well off their opening lows. This behaviour was repeated on Monday with stocks and commodities rallying rather significantly during the last hour.

On both Friday and Monday we were particularly interested in the apparent lack of bearish activity in emerging market and junk grade corporate bonds which were the very markets that should have borne the brunt of the Dubai World default. Yes it seems that the bulls are alive and well and that more upside should be expected over the coming weeks in equities and commodities, and downside in the USD and US Treasuries. It is a rather simplistic observation but actions speak louder than words. A bull market is defined by a series of higher highs and higher lows……there is absolutely nothing more to it than that as the graphs below representative of the major asset classes testify.

We have kept the graphs free of trend lines and fancy indicators. We see bullish behaviour in VTI, DJP, UDN, and IYR and bearish behaviour in TLT. What do you see? OK maybe you could flip a coin when it comes to TLT but for the rest even a child could tell you that they are going up……the reasons are inconsequential!

We continue to be bearish on US Treasuries more due to fundamental reasons rather than "technical" reasons. Just who is allowing Americans to blatantly live beyond their means is totally beyond us!