Bond investors are considered as much smarter than stock investors as they are especially attentive to fundamentals and much less influenced by sentiment. That's why bond investors can better forecast the long term trend for the stock market, based on their assessment on the economy prospects. Therefore, when they make a move, you better take a good notice of that.
Since the Fed has made a surprising larger rate cut at the last meeting, logically you would expect the long-term interest rate that is controlled by the market should also come down, if the bond investors also stand along with the Fed. Not this time. Actually, the 10 year interest rate has shot up 10% since the Fed 50 PB cut over the past couple of weeks, which suggest they think the Fed is wrong about the inflation. In other words, bond investors are telling us inflation will come back again, which won't be great for the overall economy. If so, don't bet on a great stock market if the economy is doing poorly.
Here is the TA chart for the 10-year treasury rate, which suggests that it will go up towards 4.5% in the weeks ahead.
With the bulls finally pushing SPX above 5800, a top is settled in. Betting on the downside will be more profitable than the upside moving forward from here. That's what we did today by playing with the SPY puts.
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