📊 Q3 Earnings are here! Plan ahead with key data on upcoming stock reports - all in 1 placeSee list

Stocks Drop As Real Yields Explode Higher

Published 09/01/2022, 05:50 AM
Updated 09/20/2023, 06:34 AM
US500
-
QQQ
-
NVDA
-
TER
-
TIP
-
SMH
-

Stocks finished the day lower again yesterday, with the S&P 500 dropping 78 bps to 3,954. But the big moves that drove that end-of-day sell-off appears to have come from a more than $4 billion sell imbalance from yields and real yields jumping. Not sure the move in yields was due to month-end rebalancing, but the 5-year TIP rate rose to around 75 bps, a new cycle high.

Yields Chart

TIP

This sent the TIP ETF sharply lower yesterday, dropping by a massive 90 bps and closing right on support at $113.90. If that level of support breaks, then I think the TIP ETF will be heading to new lows, and if the TIP ETF starts making new lows, I think the odds of the QQQ making new lows increases dramatically.

TIP ETF Daily Chart

Nasdaq

As I have explained for months, where the TIP ETF goes, the QQQ will follow. The TIP ETF represents real yields, and if falling real yields helped to give the QQQ that inflated and overvalued price, then rising real yields will take it all away, and when the TIP ETF drops, it is an indication that real yields are rising, which is terrible for the QQQ and stocks in general.

QQQ Daily Chart

S&P 500

The S&P 500 closed right on support yesterday, around 3,954, and is very close to entering the zone that is so critical. It is starting to look like the index wants to at least fill that gap to 3,920.

S&P 500 1-Hr Chart

Financial Conditions (IEF/LQD)

The reason I say that is because real yields are rising, and financial conditions are tightening. The IEF/LQD ratio was higher yesterday. If that continues to increase, it is likely to be another sign that stocks have further to fall.

IEF/LQD 1-Hr Chart

Semiconductors

You can also see that the Semiconductor ETF (NASDAQ:SMH) finished just below support at $214.50 yesterday and, perhaps more importantly, has failed to sustain the breakout from the declining channel. It is possible, that the ETF will fall below $200.

SMH Daily Chart

Teradyne

Teradyne (NASDAQ:TER) looks very weak and close to breaking support around $83. Once that level breaks, there is very little support to keep the stock from falling to around $74 and its pre-Covid highs.

Teradyne Daily Chart

NVIDIA

Well, NVIDIA (NASDAQ:NVDA) is trading around $150 and just one bad day away from making a new low, and given those horrible results, it probably should be making a new low.

Nvidia Daily Chart

Original Post

Latest comments

Loading next article…
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.