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Thursday, December 3, 2015
SPX v TNX - Which way will it go?
This is the S&P 500 chart compared to the 10 yr yield.
You can see in July, TNX started to turn down as the chance of a Fed rate rise started to look less likely. This created a divergence from stocks. S&P 500 eventually gave in to the downside and reconnected to the correlation in August.
Then both went up a bit together and down untitl stocks diverged higher in August. TNX turned up this time because the the ridiculous NFP number beat caused the rate rise to be back on the table again.
We now have a divergence again. Stocks and TNX were turning down and then for some curious reason stocks diverged higher after the terror attack in Paris. TNX continued lower in spite of the general belief that the Fed will raise the rate in December.
You would expect that if the Fed is going to be raising the rate in just under two weeks, that TNX would be turning up by now. I don't get what I am seeing here. TNX is not showing any sign that it is expecting a rate rise from what I can make of it. I don't see the Fed raising the rate either. I think we could have a better idea when we hear from the ECB. If they do more QE in Europe I don't see the Fed raising this month. I could be totally wrong of course.
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