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Good selling in Treasuries

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One comment from a lot of traders this past weekend at the OptionInvestor Expo was how much bond YIELDS have helped traders in their buy/sell stock decisions. Last week we were perhaps given hint that a change was beginning to take place in the markets when the 30-year YIELD broke a long-term downward trend. It's taken a couple of days for that observation to have further meaning, but we are seeing a lot of selling in bonds today. Here's a look at the 5-year YIELD and something I think traders should now be doing.

5-year YIELD Chart - 60-minute interval.

This morning we alerted traders that the YIELD on the 5-year (FVX.X) was back above the 4.525% level and should have traders leaning toward the bullish side. So far we've seen a lot of selling in bonds. Bullish equity traders like to see this action (selling in bonds makes YIELDS rise). If the MARKET is selling bonds, then perhaps that money will find its way into stocks and drive them higher! With bond YIELDS higher today and stocks higher, it's hard to argue this type of thinking. Now traders should also be "adjusting" their retracement brackets on this YIELD chart. Check this out and see if you see what I see!

5-year YIELD Chart - 60-minute interval.

I've left the "old" retracement bracket on my YIELD chart along with the "new" retracement bracket. What I'm noticing here is the close correlation taking place at 48 or 4.8%. Imagine if you will a stock market rally taking place along with selling in the 5-year bond that has this YIELD rising to 4.8%. Perhaps at that time, the MARKET begins to digest gains in stocks and stops selling bonds. This is a good way to set up a trading scenario, and then monitor it. If the YIELD on the 5-year gets to 4.8% and begins to see resistance on YIELD in the above chart at that level, and stocks begin to stall out, it could give you the confidence and conviction to take some profits! At the same time, I can set alerts at the different YIELD levels on the above chart. As they are triggered, I then get a very good sense of continued selling in bonds. It's a great way to trade!

Jeff Bailey
Senior Market Technician

Nasdaq-100 powers higher

The Nasdaq-100 (QQQ) shot out of the gate, and hasn't looked back. The QQQs are now up 8% on the day.

Nasdaq-100 60-Minute Chart

Resistance at 38 posed no problem for today's advance, and now we're testing resistance at 40. The QQQs seem to be having a little more trouble with the 40 level, but after running that far that fast, it deserves a little break. I noticed that volume was declining, but we seem to picking back up. As long as prices can close above 40, we should have a new area of support. Looking ahead, we have the 200-period moving average to contend with on the 60-minute chart. Reaching resistance at 44 by the end of the week would be an admirable goal, but lets take it one day at a time. The Nasdaq-100 hasn't had the best record of putting more than two winning days together this year.

Jeff Canavan
Assistant Analyst
www.premiermarkets.com

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