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.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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