Dr. Stoxx
Stock Trader & Author, Oxford DPhil, Trading Education
Regional bank stocks will turn when bonds turn, with a target of 110 for the SPDR S&P Regional Banking ETF from around 68. The turn could happen any day, but the move to 110 should play out over several months, and focusing on day-to-day moves misses that. x.com x.comÂ
Long-dated Treasuries are the safe-haven trade again as money rotates into yield. With the 30-year paying over 5%, holding non-yielding assets is harder to justify; after the Fed held, yields fell across the curve and TLT rose 1%. x.comÂ
Regional banks rejected a double top at their 4Q21-1Q22 peak, and pumping them now is market foolishness. Rising yields, falling high-yield and investment-grade corporate bonds, and collapsing real estate all argue against owning them. x.comÂ
US regional banks are among the underowned, lower-volatility areas now ripping, driven partly by earnings and an overall rotation. Alongside transports, medical devices and homebuilders, they are drawing money as overcrowded, highly margined, growth-at-any-cost areas such as semiconductors are unwound. x.comÂ
The secular rise in Treasury yields will likely last longer and go further than most expect, making bets on a yield low premature. Investors tried to time the low in yields from the early 2000s and were 20 years early. The most rate-sensitive sectors, homebuilders, mortgage names and private equity, where smart money would show up first if a turn were near, show no hint of accumulation. x.com x.comÂ
Small caps, utilities and regional banks look set for an oversold catch-up rebound as market breadth improves in early October. The broad market should make new highs led by semiconductors and big tech, with small caps and sectors previously held down by rates catching up. x.com x.comÂ
Falling Treasury yields reinforce the growth-scare thesis and mark a bullish turn for long-dated Treasuries. The 10-year yield is breaking below 5% as TLT rallies. x.comÂ
Hyperscaler credit stress and weak financials-versus-staples leadership warn of downside risk in the S&P 500 consolidation. Spreads have broken July wides, though an upside breakout is probable if financials stabilize. So far, tech weakness has lowered yields as Fed hikes are priced out, letting defensives rally and the S&P chop. If the Fed signals Nasdaq weakness won't stop tightening without better data, the tech-yield link could break in an uncomfortable, 2018-like direction. x.com x.com … Show more
Long-dated US Treasuries look favorable as the rise in 10-year yields appears mostly over; inflation searches have peaked, and only 13 of 29 tracked commodities are above their 50-day averages. x.com x.com x.comÂ
Long-dated US Treasuries show textbook capitulation, suggesting the 10-year yield is near a temporary top. Long bonds have closed below the lower Bollinger band for five straight days on rising volume, with implied-volatility rank at an extreme, a sign of extremely crowded shorts. High rates do little to restrain highly profitable companies such as big tech and semiconductors. x.comÂ