Option Investor
Market Updates

Treasuries still worth a stock trader's time

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The major indexes are at their lows of the session and today's action has seen a giveback of roughly 1/2 of yesterday's gains. It was 24-hours ago in our 01:00 intra-day update where trading in the Treasury bond market hinted that stocks might be running out of steam from an impressive rebound that started late Thursday of last week.

In yesterday's 01:00 Update, we were looking at a "zone of resistance" in the S&P 500 Index (SPX.X) 841.94 -1.08% from the 860-865 area that made for an attractive risk/reward trade for partial bearish positions.

Further buying in Treasuries today looks to have left stocks a little "starved" for capital to extend their recent gains, and a nice little pullback in the S&P500 and other major indexes is underway.

Here's a quick look at the SPX chart, which is the same chart shown in yesterday's 01:00 Update.

S&P 500 Index Chart - Daily Interval

The SPX looks to have found sellers if not lack of buyers from its WEEKLY S1 of 849.80 (thick red line) and bearish traders that may have implemented some partial bearish position trades yesterday now have some levels to monitor for further weakness. Yesterday I made note of a "zone of support" in the SPX from pivot analysis retracements at the 818-819 level and this would be my most BEARISH target the remainder of the week.

In today's market monitor, I showed an intra-day chart of the 10- year Treasury YIELD ($TNX.X) 3.904%, which is seeing some further buying in today's session. In recent weeks, I've been "experimenting" on my own with pivot analysis on the 10-year YIELD. Using last WEEK's HIGH, LOW and CLOSING yields, the 10- year YIELD is currently trading near its WEEKLY 61.8% retracement level. If the benchmark bond has already "factored" in a defensive view of equities, then the SPX might be vulnerable to its 61.8% WEEKLY retracement of 819.837, which marks the upper- end of the "zone of support" identified yesterday.

Jeff Bailey

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