The S&P 500 stopped caring about economic data. It’s trading off bond auctions now.
Today’s 10 year note auction went well. The S&P 500 rallied off its lows right alongside it.
That first hour this morning was tense. Stocks had very little to do with it.
The bond market sold off hard into the cash open. The 10 year yield pushed to 5.364%, closing in on 5.4%.
Yields crossed 5% about two and a half trading weeks ago. They’ve shot straight up to 5.3% since then.
Then the note auction hit at 10 AM Pacific. Bonds bounced off their lows and dragged the S&P 500 up with them.
Bonds still finished lower. The S&P 500 closed down about 20 handles, a move of less than 0.3%.
I don’t care about that move. I care that stocks now trade in tandem with bonds, and you know you’re in trouble when that happens.
Tomorrow brings a 30 year bond auction in the same 10 AM Pacific slot. That auction could rock markets higher or lower.
SpaceX is adding pressure of its own. It’s lining up a $40 billion bond offering after one of the largest IPOs in history and a $25 billion bond offering in June.
I call that a mad dash for cash. It feels like the last minutes.
Today’s volume never reached catastrophic levels. I don’t think this is over.
The bond market needs a true freak out moment on huge volume. Until that happens, I don’t see even a short term bottom forming.
In tonight’s video, I break down where the indexes sit heading into that auction:
- The 10 year yield hit 5.364% today after crossing 5% just two and a half trading weeks ago.
- The SPX sits about 20 points from the upper edge of its expected move after closing right on that edge yesterday.
- The market prices a $35 expected move for tomorrow against $33 today, while intraday ranges keep stretching 50 to 70 points. I’m taking the over.
- If volatility collapses before the bond auction, I may buy a straddle or strangle on the XSP on Thursday afternoon.
- The Nasdaq broke to new highs but sits only about halfway to the upper edge of its expected move, lagging the S&P 500.
The advance decline line sits at 50/50. That tape is a total slop fest, and tomorrow’s auction could be the spark that breaks it.
