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The market anomaly that could lead to new highs anyway

It's the market equivalent of dogs and cats living together —stocks, bonds and gold have been rallying side by side.

In the last three weeks, the S&P 500 has gained nearly 4 percent, gold has surged and Treasurys, as measured by the TLT, have risen more than 4 percent. Typically, so-called safe haven assets like gold and bonds don't rally along with risk assets like equities.

But just because the phenomenon is unusual doesn't mean it can't continue to happen.

Technical analyst Ari Wald noted that the lockstep rally in fixed income and equities is bizarre, but said it shouldn't deter stocks from moving higher.

"I think equities are rallying based on the economic recovery story," he said Thursday on CNBC's "Trading Nation." "The S&P is indeed setting up for a breakout to new highs."

According to Wald, the bond rally is because of investor pessimism surrounding global indexes. "What's interesting is none of the other global markets are rallying," said the head of technical analysis at Oppenheimer. "That's why bonds are rallying, it's really about global growth and I think the U.S. is keeping the world afloat."

With the price action in the bond and stock markets causing confusion, some are turning their attention to the currency pits for clues.

"The dollar is really driving the bus here," Larry McDonald, head of global macro strategy at AGC Analytics, said Thursday on "Trading Nation." "What's happened is that everybody was setting up for a summer rate hike because the Fed was getting us ready for it." But he noted that last month's disappointing jobs report tabled those expectations, and the dollar soon pulled back.

For answers McDonald urged investors to look forward to July, as he believes that if there's any improvement in data between now and then the likelihood of a summer hike is still there and that should send the dollar sharply higher.

"Chances are you get a dollar rally into July and that creates a risk-off in equities," he said.

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Brian Sullivan

Brian Sullivan is co-anchor of CNBC's "Power Lunch" (M-F,1PM-3PM ET), one of the network's longest running programs, as well as the host of the daily investing program "Trading Nation." He is also a frequent guest on MSNBC's "Morning Joe" and other NBC properties.

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