≈That’s good for Banks & Cyclicals ≈
Traders,
Intermarket analysis studies the relationship between currencies, commodities, bonds, and stocks. Though, I suppose we need to add crypto to the list now. Certain assets trend together; others move in opposite directions. One of the correlations in focus recently is between interest rates and bank stocks. And by “interest rates,” I’m referring specifically to the ten-year yield, which tracks the interest rate on intermediate-term Treasury bonds.
Historically, the trend of the ten-year usually points the way for financial stocks. This is due in part to how banks make money. Their business model is one of borrowing money at short-term rates while lending money at long-term rates. The higher the spread between the two, the better. Lately, the Fed has had short-term rates pinned at zero, but long-term rates started ramping higher in Q4 2020 as market participants began to price-in greater growth and inflation expectations.
Unfortunately, April ushered in the beginning of a sharp correction in yields that correlated with cyclical stocks like financials, energy, basic materials, and industrials falling out of favor.
But over the past week, the tide has begun to turn. The ten-year yield is up four days in a row and on the cusp of completing a clear double bottom pattern. It’s not a coincidence that bank stocks have firmed up at the same time.
If you want cyclicals to continue their developing strength, then vote for higher rates.
#TeamTackle
Chart of the Day
Yields Double Bottom
With Monday’s push higher, yields (TNX) are knocking on the door of their first resistance break in months. Further upside will bode well for sectors that fall under the “cyclicals” banner.
Video of the Day
Onboarding with Coach Frank
Coach Frank always does a fantastic job highlighting the new and existing features for new members to the Tackle Trading community. Last night was no different. Check out last night’s onboarding session with Coach Frank if you want to see what Tackle Trading has to offer you.
Today’s line up
Traders Lounge 11 AM EST
Join the coaches in this live lounge, ask questions, discuss ideas or just sit back and listen to veteran traders discuss market conditions.
Halftime Report 12:30 PM EST
The Halftime Report starts at 12:30 EST and covers what news is driving the market, chart analysis from the movers and shakers of the day and fun in a way that only Matt and Tim can deliver.
Trade Masters 7 PM EST
Join us every Wednesday at 7 PM EST on YouTube as the Coaches go over trade ideas from the Trade Master’s crew!
Financial freedom is a journey
Sign up now and gain unfettered access to all of the quality content and powerful Scouting Reports that our Pro Members enjoy for 15-days absolutely free with no strings attached and let us show you what your trading has been missing.
Legal Disclaimer
Tackle Trading LLC (“Tackle Trading”) is providing this website and any related materials, including newsletters, blog posts, videos, social media postings and any other communications (collectively, the “Materials”) on an “as-is” basis. This means that although Tackle Trading strives to make the information accurate, thorough and current, neither Tackle Trading nor the author(s) of the Materials or the moderators guarantee or warrant the Materials or accept liability for any damage, loss or expense arising from the use of the Materials, whether based in tort, contract, or otherwise. Tackle Trading is providing the Materials for educational purposes only. We are not providing legal, accounting, or financial advisory services, and this is not a solicitation or recommendation to buy or sell any stocks, options, or other financial instruments or investments. Examples that address specific assets, stocks, options or other financial instrument transactions are for illustrative purposes only and are not intended to represent specific trades or transactions that we have conducted. In fact, for the purpose of illustration, we may use examples that are different from or contrary to transactions we have conducted or positions we hold. Furthermore, this website and any information or training herein are not intended as a solicitation for any future relationship, business or otherwise, between the users and the moderators. No express or implied warranties are being made with respect to these services and products. By using the Materials, each user agrees to indemnify and hold Tackle Trading harmless from all losses, expenses and costs, including reasonable attorneys’ fees, arising out of or resulting from user’s use of the Materials. In no event shall Tackle Trading or the author(s) or moderators be liable for any direct, special, consequential or incidental damages arising out of or related to the Materials. If this limitation on damages is not enforceable in some states, the total amount of Tackle Trading’s liability to the user or others shall not exceed the amount paid by the user for such Materials.
All investing and trading in the securities market involves a high degree of risk. Any decisions to place trades in the financial markets, including trading in stocks, options or other financial instruments, is a personal decision that should only be made after conducting thorough independent research, including a personal risk and financial assessment, and prior consultation with the user’s investment, legal, tax and accounting advisers, to determine whether such trading or investment is appropriate for that user.
