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Smart money is beginning to notice a divergence that will spell major trouble for the stock market. First, interest rates are spiking dramatically higher. The 10 year yield is trading at 2.12%. This is a gain of 5% on the day and the highest level in over a year. Next, it must be noted that this is still a deflationary environment. Even with the Federal Reserve printing all this money, deflation is still out and about. What does this all mean? Problems for the Federal Reserve. The Federal Reserve fears deflation. Yet now interest rates are starting to rise. The higher interest rates go, the less the Federal Reserve can print and the more expensive debt becomes. Trouble is brewing and the bond market is telling us of a tricky, rough outcome that the Federal Reserve did not see coming. Ultimately, when rates rise, the Federal Reserve will not be able to do much. When it is over, it's over.

Gareth Soloway
Chief Market Strategist
www.InTheMoneyStocks.com

The music in the game of musical chairs can only go on for so long. When the music stops, $hit hits the fan. We may be seeing that today with yields jumping dramatically higher. The 10 year yield is trading at 2.12, +0.10 (+5.17%). This is the highest in over a year and could literally handcuff the Federal Reserve and their massive printing of money campaign.

When interest rates rise like today, borrowing money gets much more expensive. Cheap money is the main reason the Federal Reserve has been able to print so much with so little short term consequences. In addition, this feeble economic recovery is based on cheap money. That is why housing is doing so well right now. Any uptick in interest rates will hurt home prices and sales dramatically.

When interest rates rise, the Federal Reserve will have no option but to curtail their quantitative easing policy. Higher interest rates will make the economy struggle again. Tick tock, tick tock.

The Federal Reserve may not have a choice in stopping their printing presses if this continues. When time is up, time is up.

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Gareth Soloway
Chief Market Strategist
www.InTheMoneyStocks.com

The CNN Greed & Fear Index is one of the best signals I have seen. I have followed it for some time and anytime it gets above 90 to Extreme Greed, a sell off or pull back occurs within one week. This has even been the case in a market manipulated by low interest rates and Federal Reserve massive printing of money. The Greed Index today just jumped over the 90 level, settling at 91. This to me signals a possible reversal in the coming days. Note the chart below.

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Gareth Soloway
Chief Market Strategist
www.InTheMoneyStocks.com

As we all know, almost every central bank in the world is printing money to boost exports and support asset prices in the stock market. To their credit, the money printing idea has worked as markets around the world have been rallying. Japan is now the most aggressive money printing country. The Bank of Japan (BOJ) said that they would put $1.4 trillion into the economy over the next two years. The Nikkei 225 Index (Japanese stock market) has gained nearly 7,000 points or 80.0 percent since October 2012. This rally in the USD/JPY, and the Nikkei 225 Index has been parabolic and shows the power of money printing or the devaluing of the currency. 

At this time, the major stock indexes around the world seem to be trading higher when the Japanese Yen declines against the U.S. Dollar. Traders can simply look at the chart below and see how the S&P SPDR 500 Trust (black line) and the USD/JPY (green line) trade higher together. The red line is the SPDR Gold Shares which is trading inverse to the USD/JPY. The bottom line, if the Japanese Yen starts to strengthen against the U.S. Dollar the current rally in stocks could come to an abrupt end. 

Nicholas Santaigo
www.InTheMoneyStocks.com