"Watch The Russell" & Don't Fade The Bond Rally, BofA Warns

Tyler Durden's picture

Via BofAML's Macneil Curry,

10yr USTs threaten the US $

US 10yr Treasury yields take center stage next week. After 3 months of range trading, they have resumed their year-to-date downtrend. The Friday Bearish Outside Bar (a bearish chart pattern indicating further downside) and closing break of the 2.591% range lows says lower 10yr yields are coming. We target the 2.420%/2.399% multi-year pivot zone and potentially below. DON’T FADE THIS BREAKDOWN. Watch US equities.

While the S&P500 is still constructive, small caps and tech remain vulnerable. Indeed, the Russell 2000 is dangerously close to its 200d moving average, a close below which could lead to a bout of risk aversion and be the catalyst for further yield weakness. From an FX perspective, the 10yr yield breakdown threatens our bullish US $ index / bullish $/CHF and bearish €/$ view. HOWEVER, FOR NOW WE ARE STICKING TO OUR GUNS. A break below 79.26 (US $ Index), 0.8699 ($/CHF) and above 1.3967 (€/$) forces us to reassess. In contrast, the yield breakdown increases our n/term bearish conviction on $/¥.

Chart of the week: 10yr Treasuries return to trend

The Friday Bearish Outside Bar and close below the 3m range lows say that 10yr yields have returned to a downward trending environment. In the sessions weeks ahead we target the 2.420%/2.399% pivot zone and potentially below.

Watch the Russell 2000 and its 200d avg

We are becoming increasingly concerned about small cap and tech stocks. Indeed, the Russell 2000 is dangerously close to its 200d (1113). A closing break below would expose 5yr trendline support (1057) and could lead to a bout of n/term risk aversion. This is bullish Treasuries.

Bullish US $ index view at risk. 79.26 is KEY

The breakdown in US 10yr yields threatens our bullish US $ Index outlook, as well as our long $/Chf position and topping view in €/$. However, for now we are sticking to our call. A US $ Index break of 79.26 (the Mar-13 low) says our view is misplaced and opens significant US $ index downside.

$/¥ takes aim at its 200d avg and below

In contrast to our bullish US $ Index view, we remain near term $/¥ bears. Indeed the breakdown in 10yr yields adds to this bearish conviction. In the sessions ahead we look for a test and break of the pivotal 200d (now 101.00), targeting the 99.37 swing target.

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booboo's picture

I,m tempted to put some markers down but something tells me the counter party chain will break this time around. Corzining will be sport for the Morgue.

buzzsaw99's picture

Cut my equity position by 60% Friday. Fuck it, I'm (mostly) out.

ZeroPower's picture

FYI saw heavy flow in a few junior miners on Friday. 

tempo's picture

Every QE meant an equity rally, Now tapering means a reversal, only a question when not if.

CrashisOptimistic's picture

All these poor bastards working at banks cranking out analyses of computer code to which they are not provided access is just profoundly silly, but they want to keep their jobs so they do not talk about that.

Farmland.  Find a way.

fonzannoon's picture

"Hello Ben? This is Janet. This is the 4th message i have left for u in the last two weeks. I have no idea what is going on but the people around me are talking in a more loud and animated manner recently. I have no idea what they are saying and this whole thing is just so confusing, i was wondering if you would be interested in coming back. At least until these people stop talking so loud and making me nervous. Anyway please call me back. Thanks".

AccreditedEYE's picture

Yeah.... Cause BofA has just been nailing it for the past 3 years.

DeadFred's picture

The technical story is pretty clear but something tells me that moving into treasuries as a possible currency crisis develops may not be the smartest course. Ah, Normalcy Bias is telling me there won't be a crisis so why not.

q99x2's picture

Keep an eye out for that mushroom cloud and you'll be ok.

DirkDiggler11's picture

Investing advice from BOA is just just like that relative you hate, you just fucking steer clear of it at all costs.

Goldman is evil, but not stupid. You can trade the extract opposite of Goldman's advice 94% of the time and be a winner because the folks and Goldman know what the outcome is gong to be, they just want to Muppet your ass and take your money when you follow their "advice".

BOA folks and just fucking dangerous, like a 2yr old with a hammer. They are NOT in the know, they don't know what the outcome is going to be, but there is one certainty, follow their investing advice and you WILL lose $$.

When is really comes down to it, do you want to take advice on how to invest your hard earned dollars from the people that bought Countrywide Mortgage on purpose??? I didn't think so.

Rising Sun's picture

Thanks BOA - so I should watch the RUT.  Good.  I won't be watching the RUT.

orangegeek's picture

The RUT is a small cap index. S&P500 tells a different story.

 

http://bullandbearmash.com/chart/sp500-hourly-close-time-high-turned-spi...

 

Without a doubt, these markets are diverged from reality, but price is the greatest truth.

 

The bulls aren't going to give up easily.

Everybodys All American's picture

The bulls ? You mean the Fed. Don't be surprised as the Fed backs away from the bond market that they don't keep buying the indexes. Yes. I said keep buying.

fonzannoon's picture

agreed EA. It's all about skynet from here.

TheRideNeverEnds's picture

B..but what if I already faded the bond move last week?   Help me BoA, you are my only hope! 

bugs_'s picture

also watch the transports to confirm the action in the russell.  so far no confirmation.

royal's picture

I actually think BOFA is correct. For once.

Herdee's picture

And then there's that last bar up in gold with an act of randomness happening in Ukraine.German and Ukrainian elections,CIA meddling and Russian troops on the border.So what you say?The economic ramifications worldwide on any severe sanctions on Russia could plunge Europe to even deeper levels of depression.Pop,there goes Europe.And right now,the U.S. decides to guarantee money lent to Ukraine.Russia might even get paid back billions before they take over half the country.All out of the U.S. taxpayers pocket.