Bonds weak as yields rise

US equity indexes closed moderately weak, sp -5pts at 2362. The two leaders - Trans/R2K, settled lower by -0.5% and -0.6% respectively. VIX settled +3.6% at 11.86. Near term outlook offers threat of further cooling to around sp'2350, before another push to the sp'2400 threshold, as econ-data is coming in better than 'reasonable'.


spdaily5

VIX'daily3

Summary

It was another pretty subdued day in equity land, with the sp'500 seeing a trading range of just 12pts (0.5%). Yes, short term price pressure is leaning weak, but the bears are still not able to muster anything significant. 

VIX remains naturally subdued, still unable to even briefly trade in the low teens. If the market can rally on 'good jobs news is good news' this Friday, the 10s will be due into the weekend.
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Bearish bonds

June 2016 increasingly looks to have marked a key multi-decade top in US bonds. With the election of Trump, we saw a clear break of rising trend. Since the Fed raised rates last December, price action has been choppy.. leaning a little to the upside.


TLT, monthly2

Price structure is a clear bear flag, and we're already seeing provisional confirmation of it with TLT in the $117s. First soft downside target is around $110. The $100 threshold* seems valid by year end.

*Its important to keep in mind that $100 is an arbitrary number, as TLT is an ETF, and there is some degree of inherent decay (via management fees etc).
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In any case, the old issue remains... would you like some AAPL, BAC, INTC, or even F... or instead, does a US 10yr bond seem more attractive? Unless you think another major deflationary wave is due - with yields set to collapse, bonds are the last place to be headed. Although I'd agree, US bonds would be superior to anything on offer from the UK, EU, or anywhere in Asia.

Goodnight from London
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Reflections on rate changes

US equity indexes closed moderately weak, sp -6pts at 2368. The two leaders - Trans/R2K, settled lower by -1.1% and -0.7% respectively. VIX settled +1.9% at 11.45. Near term outlook offers threat of 2350, but a weekly close in the sp'2400s is very much within range.


sp'daily5

VIX'daily3

Summary

There is little to note about today. Price action was leaning weak for almost the entire day, but again, the equity bears simply can't manage anything sustained/significant.

VIX itself is naturally subdued. If the fed do raise rates next week, perhaps a brief spike to the mid teens.. but most should realise anything close to the key 20 threshold looks out of range.
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Interest rates and equities

I've been noting lately to a few people, that one of the most bearish signals for the economy and equity market will (ironically) be when the fed start cutting rates.

See: https://en.wikipedia.org/wiki/History_of_Federal_Open_Market_Committee_actions

Scroll down to 'historical actions'. In particular, look to Aug'2007, when the fed first lowered the 'discount rate' by 50bps to 5.75%. That was the very first warning. By Jan'2008, the fed were in borderline panic mode.


US fed funds rates and the sp'500

Without going over the 2007/09 horror story in full... the point should be clear. It was the around the time that the fed started cutting rates that the equity market peaked (Oct'07). Conversely... as the fed raise rates, that is (almost always) a bullish signal.

Rates still look set to increase across this year. However, the moment the fed do cut, I'll be the first one to sound the alarm bells. The natural target would be the sp'1600/1500s, at which point the printers will be spooling up for QE4. Perhaps the only uncertainty will be who exactly hits the PRINT button, as Yellen is set to be replaced in Jan'2018.

Goodnight from London
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For those with an interest in the precious metals and related mining stocks...

For details:  http://permabeardoomster.blogspot.com/p/research-reports.html

Happy eighth anniversary

US equities closed moderately weak, sp -7pts at 2375. The two leaders - Trans/R2K, settled lower by -0.6% and -0.7% respectively. VIX settled +2.5% at 11.24. Near term outlook offers upside into the low 2400s, as the equity bears remain powerless. Energy sector remains key to negating the threat of a basic main market retrace of 5%.


sp'daily5

VIX'daily3

Summary

Suffice to add... Mondays have lately generally favoured the bears, but 'moderate' declines are all that have been achieved. There is little reason why we won't see renewed upside into the sp'2400s later this week.

VIX is naturally subdued... and almost saw the 10s this afternoon. Even if the fed raise rates next Wednesday, VIX 14s look a stretch.
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Eight years

Today was overlooked by many, but its been a full eight years since the collapse wave intra low of sp'666.79 on March 6th 2009.

sp'daily 2008/9, historic

For the wave counters out there, the above chart is pretty in line with what many of you believe. Anyone who has been following/trading this market since that time deserves some kind of 'endurance' prize. On that retrospective note...

Goodnight from London
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