Bonds vs. stocks

New lows for stocks overnight, and new highs for bonds (man, do I wish I hadn’t gone flat yesterday afternoon). By the way, that fractal played out, since the small decline into the close yesterday foretold a greater decline overnight.

S&P futures in white, 30-year treasury futures in blue here. You can see that they have each formed a megaphone pattern. We’ll see if they respect them today or slice right through in a panic.

Source: Interactive Brokers

And for those who are waiting with baited breath for the long bond to collapse, consider this 3-month chart of futures for 30, 10, 5 and 2 year treasuries. They all still move together, and they all go up as stocks go down.

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But of course risky debt moves opposite to treasuries — just when you most need bonds for safety, it trades like the stock market. Here’s a 3-month shot of TLT (blue, 20-30 year T-bonds), JNK (red, junk bonds) and HYD (green, high-yield munis):

Source: Yahoo! Finance

Line in the sand

S&P 500 e-mini futures, including overnight trading, 1-month view, 1-hour bar:

Interactive Brokers

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The story here is that nothing is confirmed yet. The megaphone pattern (expanding upward wedge) hasn’t been busted, so we could still make a new high here, though the strength of such an advance should be weak. Each leg up for the past several weeks has sported weaker internals, such as a lower advance/decline ratio.

Based on internals, sentiment indictors and the action in other asset classes, I think the top was made about 10 days ago, but you never know. Don’t get caught in a bear trap.

By the way, this is what a busted megaphone looks like (Eurostoxx 50, 1 month chart):