Even with the March-May top formation pressing ES (Emini S&P 500) beneath its breakdown plateau at 2035/30, 10-year YIELD remains bid, within a powerful upleg off of its May 15 low at 1.69% to yesterday's high at 1.88%.
The YIELD upleg itself is part of a larger bottoming formation from late March, which provides an exact mirror image of the ES top formation.
Hmm... stock down and yield up? Under what conditions would such a combination unfold?
Back in the old days, such a set-up would unfold when the economy was overheating (6% growth) to such an extent that the Fed-watchers and bond traders anticipated the start of a rate hike cycle.
This time is obviously different because nominal growth is barely 2%, with inflation at around 1.3%, leaving real growth at 0.7% (give or take)!
Hardly a set-up for a rate hike cycle!
No, something else is going on, and given all of the distortions that have evolved during the post-crisis, QE experimentation era, whatever is going on has potential to be a real anomaly.
To me, the key issue is potential loss of confidence in the efficacy of the Fed by bond investors, as well as political meddling by our "new political leaders," at least one of which has broached the subject of reneging on some of the $20 Trillion the US owes its creditors.