Don't Ignore This Chart!

Fed Holds Steady; Treasury Bulls Send Stocks Bad Signal

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Well, the Fed meeting and announcement has come and gone.  All the drama is over.  At the end of the day, Fed Chair Janet Yellen decided to leave interest rates unchanged for now, citing weakness abroad as one of the reasons for such delay.  It's not often that the world's chief central bank looks outside its borders to determine monetary policy, but such was the case this afternoon.  While there was a bit of back and forth in U.S. equity markets when the announcement was first made, stock prices finally surged higher - until the bond market closed.  In fact, it was as if the bond and stock markets heard two different announcements.  Generally speaking, treasury yields and stock prices tend to move in the same direction.   In the chart below, you'll see that to be the case intraday over the past several days until the announcement was made.  It was frenzied buying in treasuries as yields plunged.  Surprisingly, however, the S&P 500 surged higher, moving 100% opposite the 10 year treasury yield.  Once the bond market closed at 3pm EST, though, the S&P 500 did a little "catching up" and sizable gains were erased by day's end.  Check this out:

You can see that the 10 year treasury yield and the S&P 500 move mostly in unison.  But at 2pm EST today, the TNX fell like a rock while S&P 500 prices surged higher (red shaded area).  Then the bond market closed and equities sold off hard.

Happy trading!

Tom

Tom Bowley
About the author: is the Chief Market Strategist at EarningsBeats.com, where he provides stock market education, guidance, and trading strategies using a unique combination of technical, fundamental, and historical analysis. Tom provides EarningsBeats.com members with four portfolios (Model, Aggressive, Income, and Value), all designed to beat the benchmark S&P 500, and a revolving Watch List of hundreds of companies reporting strong quarterly earnings (must beat both revenue and EPS estimates) and exhibiting technical strength as well. These companies comprise EarningsBeats' annotated Strong Earnings ChartList (SECL), from which Tom trades exclusively. Tom writes a Daily Market Report (DMR) for members to include an executive summary, market outlook, sector/industry watch, and trading ideas. Learn More
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