Much has been said on this site about the bond bubble so I will spare you any restatement of the same old tiresome statements I have been making. However, take a viewing of these two charts. First one is of the long bond yield and how it is right at resistance as we head into a new trading week. A break over this level argues for a move higher towards the 3.70% level and then 3.88% which was a major level on the way down. This by itself is not that big of a deal. however, if you look at the second chart, that of the S&P 500 on the same 30 minute scale, it is right at resistance as well - that argues that both markets are interlinked at the moment contrary to what was being bantered about on bloomberg and
CNBC on Friday by these yahoo bulls in the bond market (and growling bears in the stock market).
If the S&P climbs from here, the bond is going to make it ways towards that first resistance line. If the S&P continues on its move and gets over the 1080, the bond is going to spike higher - ie the bond market rally might be over or at least a correction will be taking shape. Like any euphoric bull market, the bond bulls will not go down easily and thus we'll probably see 3.88% serve as solid support for their case and a move back down towards the 3.70% level will probably follow. Stocks meanwhile are going through the August doldrums so whatever dance the bond was to do, the stock market will have to follow its lead and be a viable dance partner.
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