While the media is obsessively focused on cheering for the S&P 500 to close at a new all-time high, the bond market is quietly collapsing.
TLT broke its 50-DMA today and has now had its second worst 5-day slide since the March 2020 meltdown.
The last time bonds got hit this hard was the end of June and the S&P 500 had sold off over 6% from its high. However, history doesn't usually repeat itself exactly, so I never want to assume that it will.
Additionally, bonds falling is not always bad for stocks. The more important question is why are the bonds falling? If bonds are falling because the economy is recovering faster, that's good for stocks.
On Tuesday and Wednesday, bonds fell on the back of two inflation reports. Today they fell out of bed when the there wasn't enough demand at record-sized $26 billion auction. Neither sounds good for stocks.
The market has a funny way of ignoring bad news, until it can't.
The TLT is sitting is through the 50-DMA and at the major closing trend line you see in the chart, while JNK looks to be rolling over.
Don't panic, but don't let the S&P 500's all-time high make you take your eyes off the bonds.
Best wishes for your trading,
Geoff Bysshe
President, MarketGauge.com
(Geoff is filling for Mish until August 31st)
- S&P 500 (SPY): Doji and today's high is 3 cents lower than yesterday. Be cautious under 332. Watch 330 as important support
- Russell 2000 (IWM): Double inside days! 160 resistance area and 153 key support
- Dow (DIA): Consolidation day. 270 now pivotal support
- Nasdaq (QQQ): Ran up to old high, but, like the SPY, couldn't get there or stay there. Doji. 275 is the all-time high level to break. 260 is key support level and a trendline
- TLT (iShares 20+ Year Treasuries): Weak demand at today's 10-year auction sunk the bonds. Now well below its 50-DMA. 162 next big support.
