Inflation Talking Heating Up

 With crude oil relentlessly going higher, along with the grains and industrial metals, the bond market is feeling the heat.  Its the reflation trade, part 86.  We've seen this story before.  Anytime you get a weaker dollar, commodities going higher, and lots of money printing, the inflation alarmists come out of their bunkers to recommend that you sell bonds and that a commodities super cycle is coming.  

I am one of those inflation alarmists.  But I never took any action because I was focusing on stocks and wasn't looking at the big picture.  But now is not the time to act on those views.  Same with going long stocks, as the inflation talk has weakened the bond market to the point where it is going to start being a negative for the stock market.    

Most big selloffs in stocks were preceded by a big selloff in bonds from anywhere from 1 to 5 months before it happened.  If this bond weakness goes into June, that sets up a potential waterfall decline scenario to occur from anytime from July to December.  

We are seeing some of that bond weakness spilling over to stocks.  I wouldn't be a buyer of this dip until you get closer to SPX 3860, the previous high in January.  Don't expect any big selloffs just yet, still feels like too many people are looking for that 10% correction and stimulus pump is still ahead so no big flushes until at least the first Biden stimulus is passed.