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Certifications cited for stock's turn higher

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The Dow Industrials (INDU) 8,587 +1.24% has reversed earlier losses while the S&P 500 Index (SPX.X) 903.94 +.23% and NASDAQ Composite (COMPX) 1,309 +3.19% build gains after a flood of CEO and CFO certification begin streaming in before today's 05:30 PM EST deadline.

Earlier this morning, it was estimated that approximately 240 companies had yet to certify results, but that number has been markedly eaten into as the 05:30 PM EST deadline approaches. While it is very difficult to keep track, it looks like 104 companies are still yet to report. Just an hour ago, the number stood at 147.

This appears to have "lifted a weight" of near-term uncertainty from investors minds and has traders carefully monitoring their stocks and sticking to disciplined stops.

We have seen a reversal higher in the 5-year YIELD ($FVX.X) from this morning's multi-year lows of 3.03% as selling in the shorter-term hints once again that there may have been an asset allocation program hitting this bond from the sell side as YIELD closes out at 03:00 PM EST at 3.182%. This is a rather substantial short-term move. While it would take a YIELD move back above the 3.371% YIELD level to have me thinking a potentially longer-term liquidation of this bond is underway, today's reversal at a potential retracement level is notable.

5-year YIELD Chart - Daily Interval

In today's market monitor we noted that the 5-year YIELD had reversed course and selling was picking up when this bond's YIELD was near unchanged levels. We have seen further selling since, and action does look to be technical in nature from the 3.031% level.

It is notable however that while this shorter-term maturity sees selling, both the 10-year YIELD ($TNX.X) 4.063% and 30-year YIELD ($TYX.X) 4.883% saw their bonds finish higher on the session (YIELD was lower). This type of action hints that any asset allocation program was YIELD specific as bond traders perhaps look to lessen exposure to a lower YIELDING instrument, and turn toward higher YIELDing or return driven investments near-term.

Regardless, equity bears cannot ignore the fact that stocks have responded higher and if trading bearish, stick with disciplined stops.

Jeff Bailey
Senior Market Technician
Option Investor


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