The Federal Reserve’s decision to lower rates didn’t have the expected impact on bond yields, as they have actually risen recently. This unexpected movement is surprising given the dovish tone of the Fed’s communication. However, much of the rate cuts were already priced into the bonds prior to the announcement, leading to a classic "sell the event" scenario that traders are accustomed to.
Despite this initial reaction, what truly matters now is the future trajectory of these yields. There are several factors at play that could influence their movement:
- Soft economic data indicating a potential slowdown
- Commodities rallying due to China stimulus, geopolitical tensions, and weather disruptions
- Talks of additional rate cuts later in the year
Analyzing the 10-year yields, it’s unlikely that they will rise significantly from their current levels. The charts show an increase in rates on the 30-year bonds, but it remains to be seen if this trend will continue or reverse.
When looking at the TLT ETF, there are key indicators to watch for:
- Monitoring the 50-day moving average for support
- Tracking the price’s proximity to the 23-month moving average and daily chart support
- Observing any bullish or bearish signals such as a move above 98.89 or a break of 97.85
The performance of TLT compared to other assets like can provide insights into market sentiment and risk appetite. A rally in TLT could potentially have a negative impact on and equities, while benefiting emerging markets and commodities.
ETF Summary
(Pivotal levels indicate short-term bullish or bearish sentiment)
- S&P 500 (SPY): 565 pivotal support
- Russell 2000 (IWM): Range 215-225
- Dow (DIA): Showing signs of topping action
- Nasdaq (QQQ): 475 support, 485 resistance
- Regional banks (KRE): 52-55 support zone
- Semiconductors (SMH): 240 pivotal
- Transportation (IYT): 67.00 support, 69 resistance
- Biotechnology (IBB): 140-142 support zone
- Retail (XRT): 73.50 support, 77 resistance
- iShares iBoxx Hi Yd Cor Bond ETF (HYG): Trading above the 200-WMA, indicating health
By closely monitoring these key indicators and trends, investors can gain valuable insights into market movements and potential opportunities for their investment portfolios.