Generally speaking, "W" formations lead to double bottoms and a breakout to the upside or double tops and breakdowns. In this case below, the rolling front month contract of the 10 year note looks like it is failing on the breakout side of this "W" formation. If you combine such with the overvalued state of the market, a move to the bottom of the range looks like it is materializing. I am on record as saying this rate market is overvalued and this chart is evidence that the bullish fever, which has been rampant in this market for months now, is slowing - which one would think would help stocks get off the snide and move higher.
Last night on the "tweet" roll, I have a conversation with another trader about his belief that we are in a "generational" move into fixed income. I don't agree because the bull market in rates has been on for about 30 years now. The time for the generational move was closer to the beginning of the move and not near this end. Also human nature is to take risk in these markets and if stocks start to outperform versus bonds, it will just be a matter of time before those buying fixed income hand over fist will realize that
Mcdonalds has appreciation and
yield!
via StockCharts.com
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