After going out in the 3.22 range last night, the benchmakr 10yr TSY note pushed higher out the gate this AM all the way up to 3.28% where support was found in unison with a modest decline in equities.
Despite their recent fall, stocks have already shown potential support around their opening levels (roughly the same as yesterday and Tuesday's highs) around 1234. The more distance stocks put between themselves and that support level, the more challenging it might be for bonds to attempt a year-end recovery rally. Of course we'd never assume a lock-step connection of the stock lever, but so far this morning, it has been fairly connected, and as the day wears on, there are fewer and fewer reasons for it to disconnect.
MBS have met support or rather, stopped the bleeding, in a similar fashion. Keep in mind that half of the huge discrepancy from yesterday's prices is due to the roll.
The bottom line to all the market movements however, is that market is doing, well, I guess there's no need to write it twice, since I wrote it yesterday...
"After yesterday's highs, we can see yields racheting back down toward that line, suggesting a breakout either late tomorrow or next week. AQ has described this formation as the market "storing energy" for a bigger move. It is called a "flag or pennant formation", which when viewed on a longer run interval implies CONTINUATION is looming."
I will update the chart with today's trading though, so you can see how these pennants/flags usually play out:
So that's it then... 1st round goes to 3.17 being new our new primary resistance target.
Here are some of the key components of the Consumer Sentiment report.....
RTRS - THOMSON REUTERS/U. OF MICH US CONSUMER SENTIMENT INDEX PRELIMINARY DEC 74.2 (CONSENSUS 72.5) VS FINAL NOV 71.6
RTRS - THOMSON REUTERS/U. OF MICH CURRENT CONDITIONS INDEX PRELIMINARY DEC 85.7 (CONSENSUS 83.1) VS FINAL NOV 82.1
RTRS - THOMSON REUTERS/U. OF MICH CONSUMER EXPECTATIONS INDEX PRELIMINARY DEC 66.8 (CONSENSUS 66.4) VS FINAL NOV 64.8
RTRS - THOMSON REUTERS/U. OF MICH 12-MONTH ECONOMIC OUTLOOK INDEX PRELIMINARY DEC 77 VS FINAL NOV 71
RTRS - THOMSON REUTERS/U. OF MICH 1-YEAR INFLATION OUTLOOK PRELIMINARY DEC 2.9 PCT VS FINAL NOV 3.0 PCT
RTRS - THOMSON REUTERS/U. OF MICH 5-YEAR INFLATION OUTLOOK PRELIMINARY DEC 2.7 PCT VS FINAL NOV 2.8 PCT
RTRS- THOMSON REUTERS/U. OF MICH CONSUMER SENTIMENT, EXPECTATIONS INDEXES HIGHEST SINCE JUNE 2010
RTRS - THOMSON REUTERS/U. OF MICH CURRENT CONDITIONS INDEX HIGHEST SINCE JANUARY 2008
And finally a chart of the full index over the longer run...
After seeing this chart, maybe stocks were secretly hoping to break 75? who knows... I smell another range consolidation/triangle/pennant/flag coming on...