Morning Notes — Bond Yield Resistance

Bond yields: This week’s ECB meeting provided a one-day pause in the backup on promises of accelerating bond buying. With 24 hours to consider the consequences, markets have realized the stepped up pace only exhausts the ECB’s existing PEPP program sooner than expected and backup has resumed. At 1.632%, 10-year Treasury yields are again challenging technical resistance in the 1.62-1.70% range. The level should hold into next Wednesday’s FOMC meeting as market participants check their confidence into an updated dot plot, policy statement and Powell press conference.

SPX/NDX: The S&P 500 (SPX) held support in the 3700-3750 range last Thursday and advanced to a record close yesterday.  The NASDAQ 100 (NDX) also held technical support (12,200-12,400) last week despite 3 weeks of pressure resulting in a ~10% correction.  The pressure started after 10-year Treasury yields broke above our predetermined threshold of ~1.45%. Ten-year yields are currently at 1.63%, but NDX closing levels above 12,750 (yesterday closed at 13,051) erase the short-term bearish pattern from the past 3 weeks and provides a setup for the index to test 13,800.