10-Year Treasury yields respected support at 2.00%, confirming the primary up-trend. Only breakout above 4.00% would end the 31-year secular bear-trend, but a rise to there would result in an almost 50% loss for bondholders. Rising yields reflect market expectations that the economy will recover and the Fed will curtail further quantitative easing.
The S&P 500 respected support at 1600 and is headed for a test of the upper channel around 1700. Reversal below support at 1600 is now unlikely, but would warn of a correction.
The VIX is rising, but remains in the green zone, below 20.
The TSX Composite reversed below support at 12500, indicating weakness. Follow-through below last week’s low would suggest a test of primary support at 11900/12000. Bearish divergence on 13-week Twiggs Money Flow warns of selling pressure.
It is not a general truth that bond holders suffer loss. Many Treasuries are held to maturity; some for matching purposes.
It works the other way round as well . If I bought a 5% coupon bond that is now 2.5 redemption yield, I and many other will see it as a5% income and not an asset with aprox 100% cap gain.
If you bought a 5% coupon bond and rates rose to 10%, you would have suffered a lost opportunity rather than an outright loss if you hold to maturity.
Not sure how you can have SPX going to 1700 whilst most other world markets are retreating as per previous post?
The S&P 500 weakened today, but there is a sizable disconnect between performance of US and Asian markets.
Obsolutely, but I cannot see S&P going to 1700 whilst at the same time other world markets continue downwards. Either the S&P will go to 1700 and drag world markets up with it or world markets will take S&P down soon enough… not sure which will occur… but with some 85% of world markets in downtrend it seems reasonable to think the S&P has not finished its correction and a print in the mid 1500’s or there about’s during the next month could be it.
Twiggs , feel like presenting technicals on Commodity Index , Gold and Oil , beyond the obvious 9 – 12 month declines / supposed floors/support ? Thanks.