Breakout Alert for Stocks. Yields NOT Peaking
After Friday’s dominance by the bulls and the very early Monday morning follow through, the bulls are on the verge of negating what has been my preferred scenario and instead opting for scenario number two below. Since a called the bottom a few weeks ago, I drew the two horizontal blue lines on the chart below and have not changed them at all. Those represent a trading range where I thought stocks would bounce in as volatility began to subside here and there, but remain elevated from pre-correction levels.
If my preferred scenario was going to continue to play out, stocks should not close above the top of the volatility range. As you can see from the farthest right green candle, price is there right now. Should that remain the case, scenario number two moves to number one and number one becomes null and void. Lots going on today and this week. It’s time to really pay attention.
As I mentioned on Friday, volume has been pretty pathetic on the rally, but leadership has been very strong. While both matter, I can reconcile these by saying that volume is more short-term than leadership. Semis, banks and discretionary all seem poised for new highs while transports have a lot of work to do to repair the damage that was done. They certainly are in no rush.
Finally, there has been way too much talk from stock pundits and analysts about the bond market. That always gets my ears up. The yield on the 10 year Treasury note had soared a tick below 3% which seems to be everyone’s line in the sand. However, over the past few days, it has settled back to 2.84%. I absolutely do not believe we have seen the peak in yields yet and 3%+ will be seen and fretted about sooner than later.