10-year US Treasury Bonds are now trading at 2.919 % yield. Analysts warn that 3% will trigger a stock market correction. Interest rates could rise slowly at first, then suddenly very fast. Once rates rise, gold will fall, bonds will fall, stocks will fall, property will fall.
This is a post-CNY update with a look at CME odds of a March rate hike (83%). Additionally I take a closer look at JP225 and SG30. JP225 is clearly the weaker leg in the correction and their relative performance suggests JP225 has more to lose. For SG30, recall that 399 is a strong level to test.
Energy stocks had prospects to become star performers in 2018 based on their January performance as well as performance of WTI. With the US stock correction however a 5-day heatmap reveals Energy (XLE) to be the worst performing sector. Also WTI technicals, performance of SGX-listed Keppel, Sembcorp.
Day to day price action suggests that US stock indices are struggling to hold on to a 10% level off 52-week high. This level is associated with ‘correction’. At 20%, it’s bear market. In absolute terms, this correction is horrid. It dwarfs ‘Black Monday’ on August 24, 2015. Delusion or meaningful?
It really shouldn’t matter to a speculator what caused this round of correction/crash. It could be a spike in the VIX complex, rising bond yields or runaway algorithm-trading. If there is a crash somewhere, it would be followed by margin calls which will trigger sell orders in other assets to raise cash.
Chinese New Year is coming so there will be a 1-2 week period where a significant segment of traders go away. Low volume environment could lead to melt-up or melt-down easily (see green zone). Moving average suggest 13-week ema could become potential resistance. Could see pinball action as market fights.
AUDJPY, SiMSCI and HSI demonstrated very high levels of positive correlation in the past but this correlation ‘fell apart’ since 2017. Is this correlation still valid? If valid, what does AUDJPY’s recent trend portend for traders in these two Asian indices? Is it time to converge? Indices to fall some more?