Yesterday we saw some fairly heavy selling as equity bears were able to get the S&P 500 to close below the 1420 level that’s been fairly important this year. Equity price action also made us bounce off of the 50-day moving average. But the selling might have been enough to give us the bearish confirmation that the candle formation we discussed yesterday was looking for. Overnight we got some decent flash PMI data out of China and a few bright spots in Europe. However, futures are about flat so we don’t have any clear direction for where things will be headed when the morning bell rings.
Today I want to take a look at the 10-year Treasury Yield ($TNX). While equities were selling off yesterday, we did not see the same action play out in the Treasury market. In fact, yield actually put in a nice gain which indicates that bonds also were being sold alongside equities yesterday.
While bonds continue to drop we’ve been able to see the yield on the 10-year create a channel as the chart below shows. The previous three touches of the top trend line has also been associated with the 200-day moving average stepping in to knock yield back down. Yesterday’s advance has taken $TNX a be just a hair away from its 200-MA and a few basis points from the top of the channel. We’ll see if Treasury’s continue to sell off and if the 10-year yield will be able to get past the moving average to make it back to the top trend line.
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