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Bond YIELDS spell trouble for equities

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I'm not an eternal bear, but I just want to try and keep traders on the right side of the trade. The recent activity in the 5- year Note (FVX.X) should have any bullish trader snugging up stops for stocks they're long. I thought that lower YIELDS this morning could keep a lid on any type of stock rally and we're definitely seeing that in some of the broader market indices.

5-year YIELD Chart - 60-minute interval

This action in the 5-year worries me as it relates to traders/investors holding stocks long and not managing their trading by snugging up stops. This should concern traders that are long stocks at this time.

NASDAQ-100 Index Tracking Stock (QQQ) - 60-minute interval.

With the 5-year YIELD lower all day, I felt the QQQs might offer the bearish trader an opportunity to make some money to the downside with a put/short play at $44.50. While a $2 move doesn't seem like a lot, it does represent more than 4% if the trade works in our favor. So far it is working in our favor and perhaps we have the 5-year YIELD to thank.

Jeff Bailey
Senior Market Technician

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