A Sleepy Stock Market Had Best Be Watching Bonds
With all the chatter of lower rates coming, the 10-year could not crack under 4.2% when given the chance.
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I saw someone note that this was the smallest range for a trading day for the S&P since March 2024. My natural instinct was to go see what the S&P did in March 2024.
Now, we don’t know whether the smallest-range day was early in the month, where the S&P climbed from 5100 to 5250, or late in the month, just before it tumbled from 5250 to 5000. Just eyeballing it I would guess that small range came at the end.
I found it interesting because in some ways the pattern is a bit similar, with that creeping upward even after a multimonth rally.
I even checked to see whether the McClellan Summation Index was in a similar pattern. But that was not the case. In March 2024, as the S&P rallied that 150 points, the Summation Index was headed upward.
Today we have the S&P up from 6200 to 6450 and the Summation Index has been heading down. So there is no similar comparison using that indicator.
I also checked in on sentiment using the 10-day moving average of the put/call ratio. I suppose we can make the case that it was hovering around .60 back then and that’s where it is now. But the pattern looks quite different to my eyes.
OK, maybe interest rates were similar. Now we’re talking! The yield on the 10-year spent the month of March 2024 between 4.1% and 4.4%. Considering the month began with rates at 4.2% and they now stand at 4.34%, I’d say that’s pretty close.
But, my oh my, look at that: In April 2024 rates surged and the 10-year got to 4.7%.
The yield on the 10-year remains in that triangle I have been drawing in for months now. I will admit, as someone who thinks rates are apt to stay in a wide range, as they have been for a few years now, I am intrigued that despite all the chatter of lower rates coming, the 10-year could not crack under 4.2% two weeks ago when given the chance.
The 4.2% level is pretty much the lows we’ve seen since May, and it is where that uptrend line comes in. Triangles work best when they break out somewhere between halfway and three-quarters of the way into the apex.
That is where we are now. If we go much beyond the end of August without a breakout, the likelihood is that we shouldn’t trust a breakout or rates continue to meander about.
So right now bonds are the most interesting thing to watch, especially since the Utes made their high (for now) at the same time rates bounced off 4.2%.
For the Utes to do something wrong, that 1080 area would have to be breached. But right now I think this sleepy stock market should be watching bonds.
