Yesterday I put out a piece titled " The Bears Have It" as we saw the US 30-year yield surge through the pivotal 4.8250% to 4.8450% area and I wrote
"We have seen what can only be described as an impulsive break through the pivotal 4.845% level on the 30-year yield which suggests a danger of materially higher levels in the weeks ahead. While we still technically need to see a weekly close the reality is that we would likely need an awful employment report and a meltdown in Equities for that to happen."
This suggested that the bears were once again in the ascendancy with one caveat being the bolded phrase above ..."While we still technically need to see a weekly close".
The one thing these markets are is volatile/choppy which is why with a big picture dynamic I often refer to at least a weekly close needed for confirmation.
This piece came after a prior note titled Short-Term Bull fights Long-Term Bear where I noted that there were opposing short-term forces that were trying to be bullish with long-term forces needing just one more technical development (That weekly close) to be firmly in the ascendancy. I covered that in the piece titled Diary- Week 74: Strike 3-You're Out?
After yesterday's surge in yields it looked very likely (but not 100% certain" that the potentially short-term bullish set up would get quickly negated.
But that chart is "Stubborn As a Mule" and the danger of Triple Momentum Divergence completing on the daily chart remains alive and well
To repeat from the Short-Term Bull fights Long-Term Bear note
What on earth is Triple Momentum Divergence I hear you say?
Firstly, the market goes into overbought or oversold territory- Fixed income is oversold.
The on the yield chart we see a high, followed by a higher high, followed by a higher high. At the same time on momentum (slow stochastic) we see a high followed by a lower high, followed by a lower high.
We now have that today if the market was to close now (and it is closing early) as the yield hit a new high and the stochastic is printing lower. To confirm we need a closing crossover of the %k line (blue) below the %d line (red) today to confirm the lower high.
If that happens that would signal the danger of a further fall in yield . A move below 4.825% to 4.845% If seen, it would then signal a move to at least 4.72% and possibly 4.68%. While this would not derail the big picture bearish outlook it would at a minimum likely delay it and provide a painful short-term correction to the Fixed Income bears.
This suggests that tomorrow's employment data will in fact be very important in that respect. While the recent JOLTS numbers suggest an NFP that might have a small topside beat any number can come in anywhere.
In addition, it is the unemployment rate at the end of the day that is most important and that comes from the household survey.
It's not over till it's over and this now looks to be going down to the wire tomorrow.
