The reflation trade looks like it may become a 2-legged stool. The dollar (or anti-dollar) leg is performing as reflation trade enthusiasts would hope while commodities are enjoying a strong rebound predicated on the inflationary impact of a weak dollar as well as demand-creation tied to a rebounding global economy.
Stocks are firm in recent ranges but they do have significant technical hurdles ahead. Resistance around the 930 level remains intact in the S&P, highs made just last week. The 200-day moving average lies at 940 while the January highs are at 944. Many similar hurdles in the currencies have fallen by the wayside over the past week. It is troubling that the third leg of the trade is lagging. It should further be noted that it is the only leg in which I have significant exposure, so that should should tell you which way its headed…
