Looking for a Low in Bonds: Chart

Bonds have been steering the ship in tech.

Technical Edge — 

• NYSE Breadth: 43% Upside Volume 

• NASDAQ Breadth: 37% Upside Volume 

I’m a bull at heart, but the headwinds have me in a cautious state. The hawkish Fed — with Bullard saying yesterday that 3.5% rates by year-end would be the “minimum needed.” The market is currently pricing in 2.5% by year-end. Supply chains were improving, but the lockdown situation in China is exacerbating the problem. Inflation may have peaked, but high prices continue to weigh on consumer spending. 

While that may set us up for a deeper decline, it doesn’t mean there won’t be bounces along the way. 

Game Plan 

Bonds remain an issue, IMO. They have had a high correlation with the Nasdaq/tech stocks. As bonds slump, it acts as an anchor to the Nasdaq. As the Nasdaq slumps, it weighs on the S&P.

At a minimum, I would suggest having the TLT and/or the ZB contract up on your screen. 

S&P 500, Nasdaq and Looking for a Bottom in Bonds

• Feel free to extrapolate this chart to SPY

In the short term, keep an eye on yesterday’s high. 

Monday’s action gave bulls a doji candle to work with. If we can clear the high — 4406 — it will put the ES over the 50-day moving average as well. That puts active resistance via the 10-day in play, followed by the 4440 level. 

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