Primary Dealers Are Buying Corporates, A Bullish Sign For Stocks

Primary Dealers’ corporate bond holdings have been in a secular downtrend since 2007, but there have been periods of weak cyclical rebounds. These occurred in early 2009, in the second half of 2010, and lately over the past 2 months, with a false start back in March 2012.

In each of those cases, the recovery began either slightly ahead of or coincident with big cyclical upswings in the stock market. Downturns in this measure have also preceded the last 3 stock market swings to the downside.

Given this pattern, this looks like a bullish intermediate term indication for stocks, at least until the Dealers’ total of corporate bond holdings turns back down.

Primary Dealer Holdings Of Corporate Bonds- Click to enlarge

Primary Dealer Holdings Of Corporate Bonds- Click to enlarge

This is an excerpt from the Wall Street Examiner Professional Edition Fed Report

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Lee Adler

I’ve been publishing The Wall Street Examiner and its predecessor since October 2000. I also provide analysis and charts for David Stockman's Contra Corner which I developed for Mr. Stockman. I’ve had a wide variety of finance related jobs in the past 44 years, including a stint on Wall Street in both analytical and sales capacities. Prior to starting the Wall Street Examiner I worked as a commercial real estate appraiser in Florida for 15 years. I also worked in the residential mortgage and real estate businesses in parts of the 1970s and 80s. I have been charting stocks and markets and doing analytical work since I was a teenager. My perspective is not of the Ivory Tower. It is from having my boots on the ground and in the trenches of the industries that I analyze and write about today. 

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