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What I’m referring to here are interest-sensitive instruments, three of which I’ve pasted below. If these topping patterns can complete, it means interest rates are an even stronger trajectory higher, and that’ll demolish equities.
Municipal bonds sounds as boring as can be, but take note of the fund MUB and its prospective rounded top. If we can complete this pattern, it is going to throw a five gallon drum of gasoline onto the small, but growing, bearish fire.
After the weak jobs report came out, all assets exploded higher. As I type this, about an hour into the trading day and about two hours after the data, every single stock index is still green (with the small caps up well over a full percentage point), but I’m intrigued by what’s going on with the bonds, which are NOT buying the “new bull market” schtick. Yes, they had a pop at first, but it was followed by a fairly meaningful drop.
Even though it’s hard for me to imagine some kind of “shock event” from the pre-open jobs report this Friday, I look forward to seeing how the market – – particularly the bond market – – reacts. The reason is that, in spite of the recent rally lately, the bond market (represented below by way of TLT) is still sporting a very good right triangle reversal pattern, and provided we stay beneath that horizontal line, it stands every good chance of more serious diminishment in price.
Well, that’s that. Bonds have failed their October 2022 lows. Equity bulls will eventually wake up.
