Unless Things Change, the Correction is Likely Over. New Trade Monday.

New Trade Joins Two Existing Trades in Bullish Territory

Based on this morning’s technical developments, this correction is likely over.  Certainly, things could change.  But the signs are very positive until proven otherwise.

I’ve been suggesting that a tradeable market bottom was forming since early April.  This past weekend, I noted that the lack of belief in the rally was a bullish development as the Fed has started an easing cycle through the back door via cutting the rate of QT in the bond market by reducing the amount of treasury bonds it sells by some $35 billion per month. 

That’s a lot of pressure off of the bond market.  And it’s showing in the trading action this morning in both stocks and bonds.

First, the U.S. Ten Year Note Yield (TNX) is now testing the lower end of its recent yield range.  A move below 4.5% would indicate that the bond bears are giving up and that bond bulls are taking over the playing field.  Moreover, it would signal that loan rates for mortgages, cars, and financing for other big ticket items will start easing and perhaps offer consumers a respite from the inflationary prices they’ve met of late.

The stock market has also responded with the New York Stock Advance Decline line (NYAD) making a new intraday high. This is bullish in the short term. Longer term, however, we need to see NYAD embark on a new uptrend.

For its part, the S&P 500 (SPX) is now trading above 5150. As with NYAD, we need to see this development hold in the present, while SPX joins NYAD in a new uptrend over the next few days.

We’ve been preparing for this over the last few weeks and already have two open trades in the paid portion of the Smart Money Passport.  Today, I’m adding a new trade.