Charlie and I got together on Thursday morning because I managed to snag some tickets to the Swans v. Fremantle Preliminary Final, so I will be in transit today with my son Daniel.
The US Fed has just raised interest rates for the first time in three years, as long-term bond yields are rising worldwide.
The US 10-year bond yield just tapped its highest level since June 2007, which is a tad ominous.
So Charlie and I thought it might be useful to jump on a plane and grab a bird’s-eye view of US interest rates to provide some context for current moves.
We show you the 40-year cycle in US 10-year bond yields, the history of bear flattening in the US yield curve and its effect on stocks.
Until we see an inversion of the yield curve, there is no need to take fright, but there are certainly enough warning signs around to say that stocks may be in for a rough road over the next few months.
Not only is it a seasonally terrible time for markets, but oil prices remain elevated with a rising risk of a serious dislocation event if the war in Iran continues for a long time.
The S&P/ASX 200 [ASX:XJO] looks a lot sicker than US stocks, with the 20-month simple moving average the next support level to watch, just below current levels.
US stocks continue to look strong, but if the weekly trend turns down, odds will rise that a correction of some sort is on the cards.
Charlie gave you a great quote this week in one of his articles that I want to repeat here. It was by the famous trader Jesse Livermore.
He said, ‘There is a time to go long, a time to go short, and a time to go fishing’. I reckon fishing is the best course of action right now.
Or in my case, it’s a time to go watch the Swannies kick Freo’s butt.
Closing Bell
Regards,
Murray Dawes,
Retirement Trader, International Stock Trader and
Murray’s Trading Room
PS: In just one hour, I can show you how to get better at picking stocks… better at timing your entry… better at managing your risk… and better at knowing when to sell. You’ll learn all of this in my new online investing masterclass – free for a limited time. Go here for access.
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