You Can Craft Any Narrative You Want, but Charts Don't Lie

Why is the market up? It’s a question I have been asked by many non-market folks in the last week or so. When I inquire why they think the market should not be up, they reply something about the economy and job growth slowing and inflation.

Back in 1987, I was only five years into my career on Wall Street when the Crash occurred. In 1988, markets hung on every economic number that was released as it looked for signs that the Crash of 1987 had had a knock-on effect on the economy. Each time a poor economic number arrived, and bonds rallied, so did stocks.

I had been of the mind that a good economy was good for stocks, but it turned out what Wall Street really wanted, as I learned, was lower interest rates, and lower rates came with a slowing economy. Thus, ‘bad’ numbers were cheered.

Yet it turned out that the Crash hadn’t really done much to stall the economy. GDP grew in 1988, the unemployment rate fell, and interest rates—hold on to your hats—went from 6.5% to near 10%!

So, if you are looking for a narrative for the market, you can craft whichever one you want. A weakening economy means lower rates. Stocks like lower rates. A strengthening economy is good for earnings, and stocks like good earnings. I say just draw lines and look at indicators!

A few months ago, when interest rates were kissing the upper limits and the yield on the 30-year was at five percent, I drew in this line of resistance. Folks hated it. It was hard to explain that I hadn’t drawn it in after the fact, but rather that it had been sitting on my chart for twenty-plus years (because if you didn’t know what came after 2003, you can see how the line (on the left side) connects three very distinct highs that made some sense).

To me, at the time, it seemed clear the chart would not break out over 5% and if it did, it wouldn’t last long. Sentiment was incredibly bearish for bonds (folks looked for higher rates)

I don’t even know what the narrative was in late 2023 or in the first half of 2025 regarding rates—I can only guess it must have been inflation—but I can tell you now the narrative is that rates are going down. How many cuts are we getting? Two? Three? Four? It seems every day the number rises.

As we head into the week where the FOMC will decide on rates, I would note I still think that the 92 area on TLT is going to struggle if it gets there. It’s got resistance there. And if you measure the head and shoulders pattern that developed this spring, it measures to 92-93.

Sentiment is not yet overheated in bond-land, though, using the Daily Sentiment Index (DSI) as it sits at 67, down from 71 earlier in the week. However, if the Ten-Year breaks under 4% I think sentiment will change swiftly. And I’m sure someone will have a narrative to go along with it!