The jump in the ten year yield to 4.9% spooked everyone, but let's put it into a perspective. The weekly chart shows that we are still in a trading band between 4.5 and 4.9%. The real danger lies above 5%, as we saw in May of 2006. If the economic data this week turns out to be benign, back down we go. Any sign of further economic strength and we will test 5% and possibly break out of the range. Fed watch is the wall of worry's favorite brick.
However, any short/medium term drop in yields will have to be put up against the longer term monthly chart which is on a steady uptrend since 2003. I have no idea what the Feds will do, but as the chart shows, a break above 5% is a much more serious affair than last year as we would push through triangle resistance and possibly drive up to 5.5%. That would pretty much end the equity bull market. We are not there yet, but always have that long term chart in mind. If we fall, look at trendline support, currently around 4.45%.
Daytraders need to watch bond futures like a hawk. They will dictate direction.
This entry was posted
on Monday, May 28, 2007 at 5/28/2007 05:47:00 PM.
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