Good Tuesday AM from your hometown lender,
There is not much on the economic calendar today.
Both China and Australia kept their lending rates steady. The bond market is still feeling its way after the Moody’s downgraded the US credit rating but for the moment things look stable. The 10-yr is at 4.49% and the psychological line in the sand is 4.50, the technical line is 4.56%
There is a great commentary below from a smart and funny gentleman, Jason Iacovelli. It can be a bit technical, but you will get the gist.
Before that, did you know that on this day in 1862, President Abraham Lincoln signed the Homestead Act into law, enabling anyone who had farmed public land for at least five years to acquire title to 160 acres free and clear, for a minimal filing fee. The act uncorked a flood of migration into the Midwest and West, turning the U.S. into the world’s breadbasket.
Happy Taco Tuesday Everyone.
Enough of the pleasantries. Let’s get after it.
First up, Chaos Factors. A bunch of talking heads are going to speak today but seriously who cares. Some will agree. Some won’t. Markets will say with each and it’s dumb. Moving on.
RECAPPING YESTERDAY…
If you know me, I love being right. Almost as much as I hate being wrong. It’s probably a combination of the two but yesterday played out as predicted expected (either way). Thankfully it did for a bunch of reasons. But take a look at the 15 minute chart. I was going to do a video but… I did not.
See those red horizontal zones here on the 10 year yield. That’s resistance and the top of the top red resistance zone is at 4.50 which is the psychologically important line (people love round numbers, it’s really like 4.52 but whatevs). We jumped up yesterday morning and slid down the rest of the day, below the 4.50 resistance wall, and through the support below it. It’s the next red horizontal zone down.
“But Jason, you dummy! If it was a support zone it would be green! Haha!”
It was, but when you break support or resistance (and stay below support or above resistance) the zone flips from support to resistance and now it’s red. Stop being smug or I’ll make it pink.
So the support became resistance and we skidded into the next one which is now grey because it’s sad or just indecisive. We were at the top and bottom of that zone so it’s looking for direction and currently holding as support.
—–
Let’s get back to the daily chart. This is from BigCharts.com. It’s just easy to read. Ignore the fact that it lists the yield at 10x the actual. Other than that, the chart works.
Looking at this, we’re still firmly in an uptrend but you have a peak 3 months ago at the far left, a peak in the middle and another at the open yesterday that are all at close to the same relative highs.
Beneath the main chart, there are 3 others that while none are cancelling out the rate uptrend, 2 are in overbought positions and the other has weakened. All signs pointing toward a reversal.
POINTING TOWARDS… NOT ACTUALLY REVERSING
Until we’re reversing we’re not reversing and until a downtrend is formed we’re not in one. That needs to be clear.
But if we zoom back out to the daily chart, we’re smacking our head against resistance. Resistance that was support and there’s a good amount of space down until we hit the next support zone. My feeling is only ridiculous earnings surprises or breaking news on tariffs could make today get wonky but that’s everyday so we worry about what we can make sense of.
Hold for continued downward movements in the short term until further notice and don’t play games with other people’s money. That’s your lock advice.
Special thank you to everyone for all the love and support with me writing the commentary yesterday and for all the outreach about my Instant Authority program. More details will be available today.
Stay safe and make today great!