From the Punter Trenches (27 February 2018)


By Tanya Rawat

Dark was the night – cold was the ground” as the song goes by Blind Willie Johnson.

Look closely at the Quarterly charts of US 10 Yr Tsy yields and the S&P 500 index, you will see an interesting relationship. Of the 2 major corrections the S&P 500 index has gone through, viz. 2000 internet crash and 2007 mortgage back securities crash, the US 10 Yr Tsy yields moved in tandem with the equity market. And both at the same when the treasury yields were testing a key secular resistance level. See charts below:

Images: Courtesy Bloomberg

Images: Courtesy Bloomberg

This would imply that if the yields are unable to breach this level, this time again, we could see a correction in tandem in the S&P 500 index also. This close in the heels on the fact that the second largest component of the index viz. the Financials index has been unable to breach the 500 level the two times it has tried to breach it. Last time it touched this level was 2007 crash. See chart below:

Images: Courtesy Bloomberg

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Copyright © 2018 Tanya Rawat. All rights reserved. These materials are proprietary to Tanya Rawat and may not be reproduced, modified, transmitted, transferred or distributed in any form without the prior written consent of the author Tanya Rawat.

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