We’re seeing something this morning reminiscent of days when markets moved in response to economic and earnings data rather than the latest utterance from a Fed official: stocks and Treasury yields are both rallying in response to a monthly labor report that beat expectations. The 10-year yield is surging over 7% to 2.68%, its highest since August 2011. The yield doesn’t face any apparent technical resistance nearby. Meanwhile, the S&P 500 E-mini futures contract is breaking out from an area of congestion over the preceding five trading sessions, extending the recovery off the 6/24 low. The contract faces Fibonacci resistance at 1631.4, then 1649.9 – 61.8% and 76.4% retracements, respectively, of the downtrend from 5/22 to 6/24.
At miAnalysis, I’ve written about how higher yields alone haven’t shaken the equity market in the past two months, it’s times when the yield jumped abruptly by a large magnitude. Today that’s not the case. One thing I’ve been watching for is evidence of the crowd moving beyond dependence on the Fed to optimism surrounding the positive economic reasons the central bank is getting ready to scale back stimulus. One day does not a trend make, and what really matters is how the markets close the day and the week. Perhaps half of a mimosa is justified this morning but save the rest of the bottle until 4:01 pm ET.
