S&P 500

DOW Above 28,000, Bond Yields Fall

Posted Monday, November 18, 2019 by
Shain Vernier • 1 min read

The U.S. trading week is off and running, led by the DJIA rally above 28,000. At the midway point of the Wall Street session, the DJIA DOW (+12), S&P 500 SPX (-0.25), and NASDAQ (-5) are hovering near flat. At this point, sentiment is largely neutral as safe-havens are seeing some moderate bids.

A bit earlier today, the U.S. Treasury Department held auctions for the 3 and 6-month T-bonds. The yield curve for Treasuries has been much maligned over the past 18 months. Today’s action did little to relieve these concerns, showing yet another modest drop in short-term yields:

Event                                           Actual      Previous

3-Month T-Bill Auction             1.540%       1.565%                   

6-Month T-Bill Auction             1.540%        1.550%

So, today’s action in the markets is a bit counterintuitive. On the one hand, the DOW is above the lofty 28,000 level. On the other hand, gold is on the rally, as is demand for U.S. Treasuries. Add it all up ― institutional traders are happy to kick the week off with limited risk exposure.

DOW Over 28,000, Safe-Havens Hanging Tough

Along with gold and bonds, the Swiss franc is making some hay vs the USD. An early-session rally in the USD/CHF has been wiped out and rates are now on the bear.

USD/CHF, Daily Chart
USD/CHF, Daily Chart

Here are the levels to watch for the near future:

  • Resistance(1): Daily SMA, 0.9909
  • Resistance(2): Bollinger MP, 0.9911
  • Support(1): Double Bottom, 0.9843-38

Bottom Line: In the event today’s bearish action continues, we may get a chance to go long from the USD/CHF’s daily Double Bottom. Until elected, I will have buy orders queued up from 0.9851. With an initial stop at 0.9819, this trade produces 25 pips on a sub-1:1 risk vs reward management plan.

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