There is an epic battle brewing between US stock market and 10 year rate which sits @ 1.73%...
When 10 year Interest rate hits 2% which is only 27 tick away...all hell will break lose and end of US stock bull run.....
IS IT that simple all of a sudden ?
NOT really.....
We have to look @ reasons for spike in 10 year rate in historical terms....
History tells us in last 5 years 10 yr interest rate averages around 2.25%, high was around 3.25%
SO why are we concerned or losing sleep over 10 year rate, because some pundits and bond strategist told us current spike is bad news.....
Interest rate follows inflation and GDP growth rate...
US economy is reopening thus inflation is rising based on many factors, US dollar weakness is one of them, everything is costing more in US dollar terms.......
By the time everything is almost back to normal 10 year should be around 2.25%...which is normal....
IF there is an overreaction to 2% to 2.25% 10 year rate.....then it will create another buying opportunity..
SO stay calm and let the 10 year go its natural route to 2% area.....
Last week stock market gyrated with every tick UP or DOWN in 10 year rate...It may continue the same until 2% is here which could be sooner than expected, so keep some dry powder handy for buying into weakness.
Among major indices Nasdaq is the weakest followed by SOX...
TAN has taken on the chin as it went UP the-most on green energy euphoria now among the weakest even weaker than Gold which came in number 2 from the bottom.
DOW is the strongest and sits near top of its trading range...
JETS is an absolute winner with RSI @ 65.65
Nasdaq , SOX and TAN below 50 DMA...
GLD is in a " death cross formation " below 200 & 50 DMA....
XLE is above 50 DMA ...
RUSSELL 2000 tested support above 50 DMA.....
XLB remains strong near its high end of its trading range....
Do not be too aggressive until 10 year yield is @ 2.00% or slightly above, patience is required and it may take few attempts to make it above 2%.....
Do some opportunistic trading and lock your profit quickly.
Every 90 days there is a new challenges in stock market and everyone gets all worked UP and then it goes away.....
Good luck with your own strategy and your comfort level.
BLOG does NOT give buy or sell.
Saleem
2 comments:
Hi Saleem,
Last week: +0.87% (YTD: +17.87%)
Notable Leaders: GRWG QRVO AGCO FDX
Notable Laggards: SUMO SNAP
My week was saved by a mid-week sell and rebuy lower, even as the indices pulled back after interest rates rose once again. I think the ferocity of the selloff in bonds indicates a shift in thoughts concerning the future, but I also think the move may have come too far too fast in the scope of global yields. A pause here would certainly help the market find some stability also. More generally, it feels like the market needs to rest to digest large one year gains and with fresh catalysts fading, so I might be overexposed currently. I'll probably sell some of my purely trade positions on pops.
Holdings: AGCO FDX LYFT QRVO HUBS SNAP AVLR ENPH MTCH PLAN SUMO GRWG PSNL EH, cash 0.0%
Stocktrader
Hi Stocktrader,
Last week Down 4.03%
YTD UP .21%
Saleem
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