Across asset classes, BofAML warns that financial markets suggest that this week will see a continuation of the risk off theme from last week. The breakout in the VIX says that investor anxiety wiil remain elevated, particularly as the S&P500 remains on track to test 10 month trendline support at 1657. In such an environment, safe havens such as US Treasuries should benefit with a target 2.544%/2.459% resistance.
VIX Breakout
The Friday breakout in the VIX, and completion of a 2wk Head and Shoulders base, says that investors are growing increasingly anxious about the risk off environment of the past week. With the Head and Shoulders base targeting 17.00/17.80, anxiety is set to rise further in the sessions ahead. Look for safe havens to benefit at the expense of risk assets.
S&P500 has further downside in store
All the evidence points to further near term losses for the S&P500. An impulsive decine from the 1729 high, bearish daily and weekly momentum oscillators and now the breakout in the VIX all keep the immediate focus lower. Downisde targets are seen to 10m trendline support at 1657 before renewed basing.
US 10yr Treasury yields target the range lows
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With risk assets coming under pressure, we expect the US Treasury market to remain well supported. Looking specifically at 10s, stay bullish for 2.544/%2.459%, with bears needing a break of 2.775%/2.782% to indicate a base and turn higher.
Via BofAML