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Updates 1:00 AM EST- Monday 6/14/21
Bullish big picture
In the big picture context, this is a calm and bullish market that is climbing a wall of worry. There are two big clues for this projection.
The first set of clues come from market internals, which have turned bullish for Nasdaq stocks, and continue to stay bullish for NYSE.
The second set of clues come from $VIX $VXN $RVX charts. They are all sending out the same message. They are likely to head lower, and this is bullish for $SPX $NDX IWM. See charts below.
However, there will be some excitement this week with FOMC announcement on Wednesday 6/16, and quadruple witching day on Friday 6/18. Here is the economic calendar for this week.
Rate, yield, and $USD
Despite the scary CPI numbers last Thursday, and the hand wringing by economists about runaway inflation, investors have not panicked and dumped bonds. In fact, they are piling into Treasury, mostly because of the weak US dollars. According to WSJ:
The cheapest dollars in years are spurring a rise in foreign investment in U.S. government bonds at the same time that pension funds are boosting their holdings—and that demand pickup could weigh on Treasury rates even as the economy strengthens....Recent Treasury bond auctions have seen an uptick in demand from foreign investors.
This is happening because 10-year US Treasury is still yielding higher than Europe or Japan equivalent bond.
Another source of money flowing into Treasurys has been pension funds. Strong rallies in riskier assets, like stocks, in recent months helped to close the shortfall many funds have between the value of their assets and their liabilities, allowing them to move cash into safer assets, like bonds. U.S. pension funds shifted nearly $90 billion of funds out of stocks and into fixed income during the first quarter of this year, $41 billion of which went into Treasurys, according to analysts at Bank of America.
We need to monitor what's happening with US 10-year yield because its rise and fall can have a lot of impact on the stock market, especially on growth stocks like $NDX. The surge in yield back in January was due in part to Japanese banks selling US Treasury bonds.
New traders don't always pay attention to yields, rates, US dollars and the bond market. But as you have seen, their movements can have a lot of impact on stocks.
In fact we would surmise that the current Big Bull up swing will continue until US 10-year yield drops down to about 1.2. (It is currently at 1.462.) Then we may see yield creeps back up again.
Read the rest of this analysis, and get the latest entry/exit signals for SPY QQQ TQQQ IWM SPX NDX based on VIX here.