Many technology stock traders know what's up and why the NASDAQ Composite is hanging around the breakeven level. What's up is that bond yields are down and that probably has some institutions moving some money into bonds ahead of tomorrow's announcement from the Fed. Purely based on a risk management perspective, who can blame them? From the outset this morning it wasn't "obvious" that this might be taking place, and it was pretty tough to find anything that looked like a screaming buy or short.
Deep Cyclicals showing some life
Several signs that there's some defense being played is how well the Dow Industrials are performing. A quick look at the Dow 30 shows shares of Alcoa (NYSE:AA) up better than 3.5%, Caterpillar (NYSE:CAT) up 2%, Du Pont (NYSE:DD) up 5%, International Paper (NYSE:IP) up 3.4%, Minnesota Mining (NYSE:MMM) up 3.4% and Proctor and Gamble (NYSE:PG) are up 5.8%. This follows similar reasoning we had earlier today by playing the Oil Service Sector as a group that may benefit regardless of what the Fed's move is. Dow Component Exxon Mobil (NYSE:XOM), though not an oil service Stock, is somewhat related and trades higher by 2.5%.
More signs of money seeking short-term safety.
One of the biggest signs of "seeking safety" is what we've seen in the bond yields. The 30-year is a very interesting chart, and the "big picture" speaks volumes of what is taking place.
30-year Treasury Yield Chart - last eleven months.
Is it a surprise to anyone that the 30-year yield is currently yielding 5.583%? Remember Friday's low on yield at 5.583%? Hmmm, that looks very curious to me. Nothing more right now than positioning by the market ahead of the Fed. We're definitely alert to what is going on and how this may put a damper on the NASDAQ Composite. Tomorrow will be interesting, but Thursday the MARKET will have the Fed's interest rate decision and that's when the bond yields will probably help us the most. It's tough to trade ahead of a big number like tomorrow's interest rate decision, and sometimes it best to stay in those groups where an interest rate cut might not have an effect.