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Bond YIELDS continue their descent

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This morning's release of GDP revision was quickly reversed to the downside. Traders that were watching bond YIELDS perhaps sniffed out current market activity if they were watching the action in bond YIELDS.

Bond YIELDS continue to fall and many stocks continue to suffer the consequences. This is nothing new to subscribers. It's been my view for over a year now that a lower bond YIELD is doom for stocks and so far I've yet to be proven wrong. Mind you, not all stocks are suffering at the hands of the lower bond YIELD as market participants put the bulk of their capital into bonds, leaving slimmer amounts available for stocks, but subscribers that have stayed bullish in some of the more boring stocks listed in the intra-day commentary have done just fine.

30-year YIELD Chart - last eleven months

The YIELD on the 30-year ($TYX.X) has picked up steam today and that had earlier gains in stocks retreating quickly. Some traders continue to ignore the importance of bond YIELD, some don't even know about it. I'll be watching the action in the 30- year near the 5.35% level in coming sessions. If you think stocks are weak right now, I can only imagine their state should the YIELD on the 30-year break below the March lows. Until I see the YIELD break above the current downward trend at 5.6%, any bullish trading I do in stocks will be very short-term oriented and using rather aggressive stops. I will also be shorting stocks that rally to a level of resistance, with the feeling that there is very little money moving into the markets that could drive stocks higher.

Minnesota Mining (MMM) - last 11 months

Shares of MMM have been consolidating in a base and the recent rally met firm resistance at the 200-day MA, break of upward trend, and downward accelerating 50-day MA. Stock continues to look short/put at current levels and bearish traders will be targeting the $100 level. Should the YIELD on the 30-year break to yearly lows, this one could get flushed to say...mmmmmmm... $90? Beautiful looking short/put that correlates nicely with 30- year YIELD. Would follow with stop at $113.50 should YIELD reverse higher.

Nike Inc. Class B (NKE) - last 11 months

Back in July, we began to think the technicals for shares of Nike (NYSE:NKE) were taking a turn for the better. We liked the stock for reasons other than the technicals. Today, I was reviewing a premierinvestor.net market wrap from July 19th that addressed the longer-term prospects for the stock as I mentioned the January 2002 calls (NKEAI) when the stock was trading at the $48 level. Under current market conditions, bullish traders are hoping the market gets "whacked" to the downside and the stock of NKE pulls back between the $45 and $48 level as a more ideal entry point. Should the stock stay firm here at $50.70, look for the stock to achieve our bullish target of $58 from the vertical count on its point and figure chart.

Jeff Bailey
Senior Market Technician

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