Up 2,500%… Is This the Correction to Buy?

I make a solemn promise not to bore you to death with more talk about bonds today.

Although I must admit there is a discussion at the start of the video below about the huge gyrations we are witnessing in bond markets around the world.

Charlie and I have been focusing on the issue for the past month to warn you about the ramifications if yields continued to march higher.

Last week, we pointed out that French 10-year bonds were selling off much faster than German bonds. This week, the spread between them blew out massively from 110bp to 140bp.

The European debt crisis was the last time they were this high.

Junk bonds are also selling off, with the iShares High Yield Corporate Bond ETF [AMEX:HYG] down 5% this year.

Keeping an eye on spreads between government and corporate debt will be necessary moving forward as rates march higher.

But that’s enough of bonds!

Charlie and I consider the lack of breadth in US markets and how it can be a good hint prior to a sell-off. We also discussed yesterday’s big sell-off in Australian stocks and whether more is to come.

For being so patient with my bond market obsession, we finish up with a small Aussie medtech stock that is in a correction after rallying from 25 cents to $6.50 (2,500%) over the last couple of years.

The future looks bright, so this correction could be the chance to start building up a position.

The current selling pressure in markets is tough on the nerves. But we have to stay focused on the fact that great stocks will be sold off along with the crap ones.

Sharpening the pencil and building up your watchlist now so you are ready to strike when conditions improve is the name of the game.

Closing Bell