U.S. Treasuries Reach Bottom, Stocks Have Room to Fall
According to Jonathan Krinsky, chief market technician at BTIG, U.S. Treasuries have likely already reached their bottom, indicating that bonds may be leveling out. On the other hand, stocks still have more room to fall.
Bonds Show Signs of a Washout
Krinsky noted that there have been significant signs of a washout in the bond market. The TLT ETF, which tracks the performance of long-term Treasuries, experienced record-breaking volume last week. In fact, Friday marked one of the highest volume days ever recorded for TLT. This level of activity suggests a possible capitulation in the bond market.
Long-Term Treasury Yields at Decade Highs
Long-term Treasury yields have recently reached over-a-decade highs. As reported by Dow Jones market data, the 30-year Treasury yield rose over 5% on Friday to its highest level since 2007.
Bond/Stock Correlation Flip
Krinsky believes that a flip in the bond/stock correlation is imminent. He expects rates to fall as stocks decline.
Projected Stock Market Movement
Krinsky predicts that the S&P 500 will fall below its psychological level at 4,200. Moreover, it wouldn't be surprising for it to test its 20-day moving average at 4,357 early this week.
In order for stocks to reach a capitulation phase, more than 25% of the S&P 500 stocks must hit a 52-week low.
Market Performance on Monday
On Monday, U.S. stocks traded lower. The Dow Jones Industrial Average was down by less than 0.1%, while the S&P 500 dipped 0.2% and the Nasdaq Composite fell 0.6%.
All Rights Reserved © 2024
Post a comment