Wednesday, May 27, 2009
Catalyst for a Stock Market Break
Often it takes a catalyst to move a market out of a trading range. Following the recent Twitter post, note how we moved sharply lower in the ES futures (bottom chart) as yields backed up in 10-year Treasuries.
This represents an important paradigm shift. When we had the recent market weakness, Treasuries were viewed as a safe haven and saw buying when stocks sold off. Now falling Treasuries and rising interest rates are viewed as a potential threat to economic recovery, weighing on stocks.