Prechter: "Market sectors are no longer competing with each other but with cash."

In today's letter, he asks,

"What does it mean when stocks, bonds, gold, silver, and commodities are all weak? According to rotation theory, it's not supposed to happen. It is indeed a rare event, but it does reliably occur in times of severe debt deflation. That's the condition at which markets are just beginning to hint. It is very early in the new trend, but these few weeks of selling across supposedly competing market sectors is highly suggestive that something new is afoot. Eventually investors will realize that these market sectors are no longer competing with each other but with cash."

Something strange happened in May. Both junk and the safety/yield-substitude trades rallied hugely and then tanked.

I'm talking EM debt, fallen angel corporate bonds (there's an ETF!), Swiss equities, preferred stocks, lumber, biotech, consumer staples, WalMart, convertible bonds, DJ transports, SolarCity, Beazer Homes (the most levered public HB), Indonesian equities, Suntech, US momentum equities, the Canadian financial sector, REITs, the Nikkei, floating rate paper, 2 year treasuries.

Those things don't normally trade in lockstep. Since when do treasuries and both blue chips and junk equities dive at the same time?

And there has long been some troublesome thorns in the side of the inflationists and money printers: copper peaked 850 days ago. The junior gold miners, the industrial metals, silver, oil, emerging market equities, and commodities all peaked in April or the first few days of May, 2011.

Why isn't Abenomics working for the Nikkei? Japanese stocks are down 20% off the highs on... May 22. Look at that broken bubble chart.