Stocks Drop As U.K. Interest Rates Explode Higher
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.
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%.
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.
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.
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.
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.
Add Chart to Comment
We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:
- Enrich the conversation
- Stay focused and on track. Only post material that’s relevant to the topic being discussed.
- Be respectful. Even negative opinions can be framed positively and diplomatically.
- Use standard writing style. Include punctuation and upper and lower cases.
- NOTE: Spam and/or promotional messages and links within a comment will be removed
- Avoid profanity, slander or personal attacks directed at an author or another user.
- Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
- Only English comments will be allowed.
Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.
Drop an image here or Supported formats: *.jpg, *.png, *.gif up to 5mb
Drop an image here or