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Treasuries and stocks reverse course

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What started out as bearish for Treasuries and bullish stocks has been reversed as the broader market averages now trade at unchanged levels, while Treasuries have found some buying and it becomes a "wait" and see type of approach from here.

Technically, the NASDAQ Composite (COMPX) 1,375 +0.01% rallied near its mid-level of regression trend to 1,425 and found formidable early morning resistance, which has been the case for the better part of a month.

NASDAQ Composite Chart - Daily Interval

The NASDAQ Composite (COMPX) 1,377 +0.17% has been the only broader market average exhibiting any type of bullishness. This is most likely due to some market makers in the 4-lettered stocks squaring some bearish inventory positions as depicted by the lower levels of bullish percent found in the larger cap technology stocks. The indicator for this has been the NASDAQ- 100 Bullish % ($BPNDX) which before yesterday had been reading "bull alert", but turned to "bull confirmed" status with yesterday's action.

Trader now begin to sense some meaningful internal repair taking place in the NASDAQ-100 and would start to look for some type of "outward" appearance improvements in the NASDAQ-100 and NASDAQ Composite.

As it relates to the NASDAQ Composite, it would take a break above the 1,430 level and further gains above 1,464 to hint at further gains to the 50-day moving average of 1,534. Downside risk for bulls remains the 1,280 level from retracement. It is noted that the NASDAQ Composite's point/figure chart exceeded its bearish vertical count of 1,700 and first "buy signal" would be generated at 1,800.

Daily breadth on the two broader markets has a neutral reading as we complete half of today's session. NASDAQ breadth shows 15 advancers for every 16 stock's declining, while NYSE breadth is even at 15:15.

Stocks hitting new lows hints that bullish traders need to be very selective as 112 stocks on the NYSE trade new lows versus just 17 hitting new highs, while 94 stocks on the NASDAQ trade new lows versus just 14 new highs.

As mentioned above, Treasuries have seen their YIELS turn lower (caused by buying in this security) and near-term YIELD support in the benchmark 10-year YIELD ($TNX.X) 4.674% should be monitored closely at 4.635%, with YIELD resistance at 4.801%. Just as we saw the NASDAQ Composite find resistance at the mid- point of its downward regression, we witnessed the 10-year YIELD find similar resistance at its mid-point regression.

10-year YIELD Chart - Daily Interval

Similar type of YIELD resistance found in the 10-year YIELD ($TNX.X) as that witnessed in the NASDAQ Composite.

Jeff Bailey
Senior Market Technician
Option Investor

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