Stock Market Viewpoint

Stock Market Viewpoint
Reading the Tea Leaves...

Monday, June 24, 2013

10 Year Treasury Note Mauling The Stock Market

Stock Market Technical Analysis Blog

click on image to enlarge

In the market today we had another day of serious damage to stocks as the bond market bubble continues to deflate driving the 10-year Treasury Yield higher which ruins corporations profitability and also jeopardizes the recent recovery in housing.  

Taking a look first at the top left corner chart we see that the sentiment EMAs did have the down cross a few days ago shifting the stock market into bearish mode at the instant the down cross happened as I discussed in the June 19th blog.  

Looking at the top right chart of the VIX we see that as it crossed above the blue 432 the stock market sell off began and has been continuing to work higher in its ascension channel causing more selling in the market.  

In the bottom chart above we see what is really causing the stock market selling to happen, the climbing 10-year treasury note being driven higher by the collapse of the bond bubble.  On the same day as the sentiment EMA down cross and the VIX crossing above its blue 432 line we also had the 10-year treasury pop back up into its longterm red line horizontal channel which puts serious pressure on stocks.  Bernanke's speech also happened right as these three junctures crossed the critical point, creating the perfect storm for stocks.  Looking a little closer at the 10-year treasury note we can see that it's climbing in a steep, narrow ascension channel.  If this channel continues to contain it, the 10-year treasury note might pull back giving us a relief rally in the stock market but if it breaks on up out of the ascension channel the stock market is in big trouble.

Trade well my friends