The biggest story in the market goes back to rates, even though the bond market was closed here in the US. The bond market was open everywhere else in the world, and UK rates were on the move again, with the 2-year gilt rising a jaw-dropping 28 bps to 4.34%, while the 30-year gilt rose by 25 bps to 4.68%. These are massive moves, and considering the BOE is bidding for these bonds is stunning. Because it seems like the BOE’s attempts to stabilize the market isn’t working.
Yesterday the BOE announced it would increase its daily purchases of long-dated gilts up to $10 billion a day from $5 billion. As of yesterday, the bank noted that there had been eight days of operations offering to buy up to GBP40 billion in bonds but had only bought about GBP5 billion. Despite the increased size, the BOE only bought GBP853 million yesterday. It seems like the BOE’s plans aren’t going very well. So you have to wonder how much of this move is now the short taking over and pressing, or how much is a loss of confidence in the BOE’s ability to control things.
It looks now like the UK 2-Year has broken out of a bull flag, which could mean significantly higher rates.
US 2-Year
It probably doesn’t mean good things for when the US 2-year reopens from its day off, and considering the chart looks nearly the same as the UK 2-year with that same bull flag, I would be mindful of watching this today. As I have said for some time, I think the US 2-year is heading to approximately 4.6%.
TIP ETF
The ETF market was already pricing in a move higher in rates. The TIP ETF fell about 60 bps yesterday and is close to breaking even lower. There appears to be a descending triangle, which suggests that once support at $104.75 breaks, the selling will ramp up again.
S&P 500
The S&P 500 fell by 75 bps yesterday, and if rates are going even higher, then I think the S&P 500 still has to go lower. The diamond pattern from last week is very bearish and, coupled with the island reversal, suggest we will see a new low, and I still think we are likely to see 3,500 and probably lower, but I’m not getting into this right now.
NVIDIA
Well, it took a while, but NVIDIA (NASDAQ:NVDA) was finally close enough to my target of around $115 yesterday. A decline below $100 is not out of the question, so I will have to watch this support region to see what develops.
Bank Of America
Bank of America (NYSE:BAC) appears to have a Head And Shoulders pattern in place, and despite its decline, I don’t think it has fallen enough yet, with the potential for the shares to drop back to $28ish.
Biotech
The XBI fell out of a bear flag and potentially has room to drop around $68 based on the length of the pole and projection out of the lower portion of the flag.
