Stock Market Viewpoint

Stock Market Viewpoint
Reading the Tea Leaves...

Tuesday, August 20, 2013

Overnight Bond Market Intervention

Stock Market Technical Analysis Blog

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Looking back at yesterday's close where we had the 10 yr treasury yield close at 2.89 just .01 away from the 2.90 level where huge automated stock market sell programs are set to trigger, it was obvious that something had to be done fast.  Looking at the charts above we see that yesterday's bond yield closing broke us up out of the upper line of its 6 year downhill channel and looking at the lower chart of the bond index we see that the bonds also slipped down thru the floor line yesterday threatening to propel the treasury yield well above 2.90 for today which would have caused a market plunge.  

During the night, Ben and Company took action and bought bonds by the truckload all night driving the bonds up thereby, causing the 10 yr yield to fall back down to 2.83 by the open this morning pulling it well away from the 2.90 stock sell off trigger.  Today the stocks rallied nicely throughout the day as well as did bonds.  

The key question now is whether or not they can stop the prevailing pattern, shown in a report last week, that investors who are selling stocks after the 4 year + 125% bull run and are skipping over the flip to bonds trade and going instead directly to money market. Today's up move in bonds did not go unnoticed by investors but the up move will have to have some follow thru to keep stock market money going into bonds instead of money market.  The stronger the bond inflow, the lower the bond yield could fall which will allow the stock market to turn back upward at this point.  This intervention must have follow thru over the next few days to keep it from looking like just a blip in the overall picture.

Trade well my friends


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