S&P500 recovers as bond yields rise, but TSX weakens

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.

10-Year Treasury Yields

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.

S&P 500 Index
The VIX is rising, but remains in the green zone, below 20.

S&P 500 Index

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.

Nikkei 225 Index

6 Replies to “S&P500 recovers as bond yields rise, but TSX weakens”

  1. 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.

    1. 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.

      1. 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.

  2. Twiggs , feel like presenting technicals on Commodity Index , Gold and Oil , beyond the obvious 9 – 12 month declines / supposed floors/support ? Thanks.

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