The Magnificent Seven Have Split Up, Allowing Money to Escape
Let's look at what's happening with bonds and see if the rally is broadening out.
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Back on January 9th, I said I thought Bonds were having a Realization Day. That’s when a trend has been in place for so long that no one even cares or notices it, but then, one day, something happens, and they realize something. In this case, it was that interest rates were high.
Earlier that week, I had shown you the long-term chart of yields on the 30-year explaining that I had had that blue line on my chart for two decades. I was surprised when it tagged it and reversed in late 2023, but since I was looking for a bond rally, it seemed to me that 5% area would be resistance again. You have to squint, but for now, it has been resistance.
Squint even harder to see it didn’t even tag the line.
I have been waiting for the yield on the Ten-Year to come down and tag this 4.40% area, and that is exactly what happened on Wednesday. While I feel as though the move down in rates is not quite over yet, I would take some profits here because it has reached that first target/support area.
A move back up over 4.55%, and I would have to reassess my view that the support is going to break within the next month. For now, let’s just say it was not an easy trade and gave me a lot of agita over the last month.
We are now at midweek, so I want to point out that the 30-day moving average of the advance/decline line is just about overbought. Notice how it spurted upward this week.
To go along with that intermediate-term oscillator, the Volume Indicator is now at 54%. It gets overbought in the mid-50s, so it, too, has stepped a toe into overbought territory.
We finally had a day where everyone got excited over the 493. That’s what happens when the Mag 7 no longer work as a block; it’s easier for the money to escape and go elsewhere. And while the IWM was up nicely, there was a lot of penny here and penny there in my charts. That’s why I am focused on the number of stocks making new highs. If we are ever going to see the 493 get a boost that lasts longer than a few days, we are going to have to see new highs increase. Wednesday, they couldn’t even get over 150 on the NYSE.
My base case is still a lot of chop and volatility in the month.
