Due to the public holiday in Melbourne for the AFL Grand Final I shot the Closing Bell video on Thursday morning.
So you know more than me where the S&P 500 finished up for the month.
My guess is that the monthly sell pivot I have been banging on about has been confirmed, which will increase my conviction that another correction could be on the cards.
US bond yields continue to march higher as the ‘higher for longer’ theme sinks in.
Stocks have actually held up remarkably well in the face of a weak bond market, but I’m not sure they can ignore the situation for much longer.
In today’s Closing Bell video, I show you a long-term chart of the US 10-year bond yield so you can see how rapidly rates are rising and the fact that the current move higher has broken a multi-decade downtrend in yields.
If the economy has managed to handle the move in 10-year yields from 2% to 4% it will be a different matter if they jump from 4% to 6%.
Past cycles have often seen a sharp reversal in yields once the high is reached. That’s because something usually breaks and then rates tumble as a hard landing approaches.
I think it could end up being a similar outcome this time around, but we don’t know how high yields have to go before something breaks.
As the sell-off in bonds accelerates, I don’t think we will have to wait very long to find out.
US stocks have continued to sell-off as I predicted last week, and the S&P 500 is now heading towards the 200-day moving average.
The real fireworks will start if the 200-day moving average doesn’t provide support.
We have already seen a slow motion crash in many small and microcap stocks so my view is that this next leg down in prices could see panicked selling in stocks that can take them into deep value territory.
I have opened up my high-risk trading service Fat Tail Microcaps to new members for the first time in 18 months because I think the opportunities on offer could be a rare chance to buy ‘when there’s blood in the streets’.
Regards,
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Murray Dawes,
Editor, Money Weekend
