Remember when Fed Days were always up? If you're struggling to remember those days it's because I think there may have only been one of those up Fed Days in the last year. Although the change on Wednesday was that the Fed was not the least bit hawkish. In fact it was almost as if they said "lower for longer."
Bonds sure took it that way, didn't they? The yield on the 10-Year is now the lowest it has been in about 15 months. Here's the interesting part. That top that broke in yields back in December (blue line) measures to 2.50%. Oh maybe if I want to give a bit more room I would say 2.40% but the point is the break is not fresh because even if we take the green triangle pattern and measure it we get 2.45%.
We should pay attention to this because the Daily Sentiment Index for Bonds is now at 84. So any further downside would probably take this right into that 90 area and we know once it gets to 90 it's gone too far.
Finally, note that the Utes have been leading bonds in that they broke out to a higher high nearly a month ago. They have not broken that steep uptrend line but the rally in Utes on Wednesday was quite unimpressive relative to the move in bonds. If this line breaks, then I think I will be right on bonds getting close to the end of the decline.
So was it really bearish that the market gave back the Fed rally? It was not bullish because for the first time in quite some time the market was given good news and ignored it. Up until this point it has been ignoring bad news.
Yet I'm going to note a few positives from Wednesday's trading, aside from the fact that the FANG stocks were seemingly the only game in town. I would remind you that markets that rely solely on FANG stocks to go up tend to be narrow and ultimately bearish for everything else because they are so narrow.
Let's start with the positives. Breadth on the NYSE was only negative by 340 issues. That is not bad when you consider the S&P lost 8 points and the Russell lost 11. In fact, that's actually pretty good. For now I'll even put the Transports not breaking 10,000 on the positive side of the ledger.
However banks acted like they couldn't find a friend in the world. The number of stocks making new highs on Nasdaq continues to contract. Wednesday's rally saw 87 new highs vs. the 146 we saw nearly a month ago. That's narrowing, not expanding. And of course the McClellan Summation Index which tells us what the majority of stocks are doing has been heading down for nearly a month now. It would take a rally better than almost anything we've seen in the last two weeks to halt the current decline.
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