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10-year YIELD testing support

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It's "crunch time" and investor tensions are reaching a peak as stock get pummeled to their session lows as cash flows into the more defensive and perceived safety of Treasuries. The benchmark 10-year YILED ($TNX.X) is right back at critical support with the bond market closing at 03:00 EST.

10-year YIELD support - Daily Interval

While we saw marginal selling in Treasuries this morning, it sure looks like the markets got defensive as Treasuries found buying and drove YIELD decidedly lower. Current analysis is that equity bears really want to see a confirming break lower in YIELD to mark another round of buying in Treasuries as the MARKET seeks out perceived safety in Treasuries.

It's been my observations over the years that the bond market is not nearly as susceptible to "emotion" and will cast its vote as it relates to perceived risk/reward between stocks and Treasuries when weighing current economic conditions.

It's tough to tell what is going to take place in the final hour of trading for stocks, as the bond market closes at 03:00 EST. If the 10-year YIELD ($TNX.X) holds the 4.635% level, we could see short-term bearish traders come in an lock in some gains in stocks as they may not have gotten a confirming break from the 10-year Treasury.

Similar to what we're seeing in the US Dollar Index (dx00y) 105.88% holding a support level, this action will surely have tensions running high.

Yesterday, I took the opportunity to outline a potential covering spot in shares of Invitrogen (NASDAQ:IVGN) $29.08 -0.68% if the stock traded $28.00. In today's market monitor, I alerted traders that that level was achieved and to lock in their gains after recent reaffirming of quarterly guidance from the company. the stock has rebounded a bit here and may be related to the lack of a downward break in the 10-year YIELD.

If trading some stocks bearish, try to stick with your targets or snug down some stops. Bears aren't out of the woods yet with the Dollar trying to stabilize and 10-year YIELD not breaking a critical support level.

Jeff Bailey
Senior Market Technician
Option Investor

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