Wednesday, October 31, 2012

10-year Treasury Yield to Show the Way

Signs of strength in the economy usually push treasuries lower and yields higher. Signs of weakness usually put a bid into treasury prices and push yields lower.
Chart above shows the 10-year Treasury Yield ($TNX) hitting resistance in the 18.5-19 area and falling back the last two days. The trend since late July is up, but this failure at resistance is not encouraging for stocks. Notice that stocks and treasury yields are positively correlated for the most part. A breakout at 19 (1.9%) would be bullish for yields, bearish for treasury bonds and bullish for stocks. Downside follow through below 16 (1.6%) would be bearish for yields, bullish for treasury bonds and bearish for stocks. 
This week’s economic data may tilt the balance and we could see a decisive move after the election. Directional movement could be limited until we get some clarity on the election.

Saturday, October 27, 2012

Nasdaq Tests 200-day Moving Average

Nasdaq Tests 200-day Moving Average:

With a sharp decline the last five weeks, the Nasdaq is poised to test its rising 200-day moving average. The red line is the 200-day and this key average was last tested in early June. Note that the index is underperforming the S&P 500 as the price relative moved below its early August low.