Wednesdayââ,¬â"¢s action in the broader averages is signaling a short-term bounce may be upon us. I am emphasizing short term. The equity markets are focusing on the bond market, specifically the 10-year Treasury.  Tuesday the yield hit 4.81% yield, which is a multi-year high. The concern is that with the longer-term rates inching up it may cut off the equity market.

10-Year Treasury

The yields on the 10-year have had a pretty strong move over the last week and have become stretched. I expect a rest, if not a small pullback, with a resumption of rates making another leg higher. The next resistance is the 5.50% yield.  If prices fall in the bond market to that degree, the equity market may break below the trading channel that it has been in since November of 2005.

S&P 500

The bounce we will probably get may be short and shallow, so Iââ,¬â"¢m much more comfortable maintaining my open positions than adding any new ones. I will be watching for any cues from the bonds to see any change in direction.

Disclaimer
The article submitted to the Tiger Shark Publishing LLC is presented for informational purposes only and should not be construed as a solicitation to buy or sell securities or securities derivatives of any kind, nor serve as any type of investment advice or strategies. Actual results may differ greatly from expressed opinion. The author expresses a personal opinion and will not assume any responsibilities of the action of the reader.

Tom Incorvia is a swing trader with 18 years of experience in the financial markets.  E-mail him at tincorvia@gmail.com.