Occasionally, a market number occurs which makes even the most non-observant market watcher say “hmmm.” It does not happen often, but such a number appeared yesterday afternoon. The yield on the 10-year Treasury note almost got to 3%. For those not familiar with this number, it is the yield one would get by buying 10-year Treasury notes from the U.S. government. What is very notable about this is that the yield is lower than it was at any time during the Great Recession. In times of great woe, investors have historically flocked to U.S. paper as a relatively safe investment. Well, by this particular benchmark, investors with lots of money to invest are notably placing it in long-term paper versus riskier asset classes such as equities. Furthermore, according to a recent Bloomberg survey of 63 analysts (from a June 23, 2010 “Business Week” article), their estimate is that the yield will rise to 3.8% in the 4th quarter. To me, that is scary. The implication is that yields will go one way- up. When something seems that obvious amidst a move that seems counterintuitive, that counterintuitive move turns out to portray logical thinking more often than not. The argument is that as government stimulus wears off, so will economic growth- which is quite a different picture than the optimistic view held by many. As an aside, I hope the optimists are correct because the alternative when things are already precarious at best is not a happy motif. As day traders, it is imperative to watch the yield particularly as gold hits new highs- and as equities puzzlingly shake off things like movement in the euro and oil.
Markets overnight were hit very hard as the Conference Board’s leading economic index for China was up only slightly versus a much bigger gain last reported in the index. This information sparked concerns over the upcoming U.S. jobs report and sparked a major 4% plus sell-off in Shanghai. Furthermore, debt concerns are being a focus again in Europe with Greek bond yields rising anew. Tokyo was down 1.3% with Hong Kong down 2.3%. In Europe, most bourses are down in excess of 2%. The 10-year yield is now 3% exactly. Oil is down 2 ½%. The yen is strong as dollar is weaker against the yen with the euro down against the dollar. Futures are down sharply. Don’t look for a major bounce today…this 3% number as discussed earlier this morning is major for the bonds. With summer volumes in effect, the sell-off likely won’t get dramatically worse either, however. Thus, look for a relatively tight range barring a major move in the yen with a focus on relative strength plays in particular as most everything else will gap down opens and no major range.
Reiterating-
If the whole story is not there -
If something is good, assume either a short thru unchanged or an A-B-A2 (preferably to the downside in a downside market and the upside in an upside market) based on direction of the market unless specified.
If something is bad, assume either a buy thru unchanged or an A-B-A2 (preferably to the downside in a downside market and the upside in an upside market) based on direction of the market unless specified-
Good- The following stocks have good news and/or a strong technical pattern
SMSC- announced decent earnings
RMBS- announced licensing deal with GE
MMM- positive revenue guidance
CWS- closed near a high
IDN- closed near a high after a New York senator discussed more security at New York airports from the company’s headquarters
IDT- closed near a high after CEO rang opening bell at NYSE and appeared on CNBC
Bad-The following stocks have bad news and/or a weak technical pattern
MU- poor earnings
GFC- closed near a low in the midst of a continual plunge
GS- closed near a low amid financial reform worries
BIDU- closed near a low
RHB- closed near a low amid worries about proposed rule changes for rehab therapy rates
BID- closed near a low
POT- closed near a low
WYNN- closed near a low
CLF- closed near a low
AMZN- closed near a low after a brokerage downgrade
IOC- closed near a low
BUCY- closed near a low
PCX- closed near a low
CHBT- closed near a low
BKS- poor earnings
Earnings:
TUES JUN 29 BEFORE
None today
TUES JUN 29 AFTER
GIS ZZ
Erik R. Kolodny- Chief Markets Strategist
Brendan P. Byrne- President
Joseph R. McCandless- Managing Partner
D. Timothy Seaquist- Managing Partner
www.epiphanytrading.com
No comments:
Post a Comment