Good Tuesday AM,
Interesting commentary from Dan Rawitch this AM.. Bonds are on their heels again, playing defense and now trying to hold a very important support level. There is no good reason for this other than the stock market, which absolutely refuses to go down. Each time it appears to pull back it is simply a head fake and back up it goes. This further feeds the investor FOMO and greed, as they refuse to hedge or buy more conservative assets like bonds. I cannot tell you how many similarities the stock market has with the stock market of 1999, just prior to the crash. Are things different enough now, given the Fed stimulus? Yes, things are different but that does not change the fact that we are in major bubble. Bubbles are invisible to investors until they pop! Each day the markets inflate, the bubble grows larger. The larger the bubble, the larger the burst. We are continuing to take long trades and our group is doing exceedingly well. That said, there is not a minute that goes by that I do not have my eye on the ball, ready to switch from offense to defense. Until stocks correct, bonds will struggle, unless we see an unknown catalyst.
We are in the center of the trading channel right now. If you are watching the 10-yr Treasury yield, I would think 1.125% is the pivot point. We are currently at 1.10. If we breech 1.125%, I think it is a signal, rates will go higher in the short term.
Please remain safe and healthy, make today great!