30yr/10yr bonds: Rates have been rising as Bonds have declined. There are signs of a possible bounce in here due to the oversold indicators and some positive divergences. However, the trend remains down. http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1606987&cmd=show[s71130040]&disp=O page 6 ... first two charts tony
Read an article on MSN money called why "Why interest rates will march higher" by Jim Jubak. Here is the link to the article. http://moneycentral.msn.com/content/P148490.asp Below are exerts from the from the article mentioned above stating Jubak's three main points. What do you guys think of his logic? "Here's why Greenspan's conundrum will push U.S. long-term rates higher for the rest of 2006. Faster growth overseas: By the end of 2006, there's a good chance that the U.S. economy will be growing more slowly than the average for the global economy. And, shockingly, for the first time in 15 years, the Japanese economy could end the year growing faster than the U.S. economy. This doesn't mean that the U.S. is about to slip into recession. Just that 2006 will witness a shift in relative economic growth. Bernstein Research projects U.S. growth at 2.9% for 2006, still a solid performance, but well below the 3.4% growth of the global economy this year. (In 2005 the U.S. economy grew by 3.5% and the global economy by 3.3%). The European economy will still lag but turn in a much better relative performance with growth of 2.4%, again according to Bernstein Research, up from 1.4% in 2005. And Japan will grow by 3.2%, up from 2.5% in 2005. Investors will tend to send more cash to the faster-growing economies this year, just as they did in 2005. Only the United States financial markets won't be on the receiving end of that preferential cash flow. Rising interest rates overseas: Yields in Japan and Europe are marching upward -- and that will keep pushing U.S. yields upwards too. On April 18, the yield on the 10-year Japanese government bond moved up to hit 2% -- for the first time in seven years. Two months ago, the 10-year Japanese government bond yielded just 1.5%. (The Bank of Japan is also currently trying to wring out some of the liquidity it pumped into the Japanese economy in an effort to jump-start growth. Bank of America estimates that about $200 billion in liquidity, much of which would have gone into U.S. Treasury bonds, will be withdrawn from Japanese banks as part of this effort over the next three months.) The European Central Bank is widely expected to raise short-term rates for the euro-zone to 2.75% in June from the current 2.5%. Nobody expects the European Central Bank to stop there because inflation looks like it's showing some life in Europe. The International Monetary Fund recently raised its inflation forecast for the euro-zone countries to 2.1% from 1.8%. Higher rates, even if they remain lower than U.S. rates, makes Japanese and European bonds relatively more attractive in comparison to U.S. Treasury bonds and will force long-term U.S. interest rates higher, if the United States hopes to continue to attract overseas capital. A weakening dollar: Higher relative interest rates elsewhere -- and lower relative interest rates in the United States -- will weaken the dollar. A weaker dollar raises the risk in holding dollars and dollar-denominated bonds such as U.S. Treasurys for overseas investors. And they will demand higher interest rates in order to supply the cash to cover the huge U.S. trade deficit -- $804 billion in 2005, or 6.4% of GDP. The financial markets got this connection immediately: On the day that the Dow Industrials rallied by 200 points, the U.S. dollar fell against the euro and the yen. Bernstein Research is projecting a 5% to 7% decline in the dollar against the euro and the yen in 2006. Not huge in itself but enough to add to the pressure on U.S. long-term interest rates."
Hi! Some good points by Jubak. Guess he joined the "rates are going higher recognition" group. We must be getting close to an intermediate term low.
Hi Steve, Agree! The DOW is already pumping up the market. Just posted this: Our stock indices traded lower into the open, and stocks gapped down taking out fridays lows by 10AM. These new lows set up positive divergences in momentum in the 15min/60min charts. The EW support pivots were tested in the NAZ/NDX, but not in the SPX as it continues to remain over 1300. With Crude down about $1.00 and Bonds trading about 1/2 point higher, all the elements are set up for a rally. As soon as this market stabilizes I believe it should do just that.
check out the volume distribution for the month in the area of 10700-10707 for the USM06 http://www.chart-ex.com/charts/30_year_tbonds_monthly.htm
Another factor that will contribute to bringing commodity prices down this week is the tendency that stocks will have to move sideways ahead of the Beige Book and Greenspan's testimony. I still think that stocks will move up but not exactly with the kind of fury that would have caused falling commodity prices to rebound.