Highlighting "Fear" In the Bond Market
by Mike Paulenoff
February 28, 2021 • 11:55 AM EST
In it, Mike highlighted the "increasing fear" in the bond market, with longer-term rates projected to continue to rise, and in the "Fear Index" itself, the VIX, suggesting increased risk in the equity markets.
The discussion turned out to be a valuable heads-up to MPTrader members in view of the subsequent dismemberment of the bond market into late last week, when longer-term (10- Year) Yield rapidly backed up to 1.61% from the 1.25% level it was at when Mike first posted his analysis on February 17.
At the same time, the equity markets sold off strongly last week, with the S&P 500 shedding 2.4% and the Nasdaq 100 losing 4.9%.
Mike posted frequent 10-Year YIELD and TLT updates throughout the week, looking for signs of upside exhaustion in Yield and downside exhaustion in the TLT, followed by signs of a countertrend move.
Early Friday morning, Mike wrote:
"Ahead of the trading day, let's address again the elephant in the room, the bond market via my attached 4 hour chart of the TLT, which shows today's pre-market strength into the 140.20 area compared with yesterday's violent, capitulation down-spike to 136.61. During the hours since the spike low, TLT has climbed 2.6%. Let's notice that as of last evening, DSI (Daily Sentiment Index) registered a very bearish and oversold figure of 9, which at the very least is a warning to bond bears that the market could be a bit too comfortable and entrenched on the short side."
What's next for TLT and 10 year Yield? Will the recent behavior of the bond market continue to impact the equity indices?
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