- US 10-year yield above 5% for first time since 2007
- Economic fears mounting
- NAS100 survives test of key support
It’s been a jittery start to the week, with the continued rise in US yields making investors very nervous about what challenges lie ahead for the economy.
We’ve heard a lot about the resilience of the US economy and the evidence has been there for all to see. But that resilience has for a long time been paired with a belief that rates won’t stay at the peak for long, a view that has been gradually fading as rate cuts have been pushed back further and further into the future.
Ultimately, there’s only so much the economy can withstand and recent moves in yields suggest bond investors are coming around to the Fed’s way of thinking.
Whether that will remain the case, I’m less convinced, but as things stand there’s clearly a growing view that the economy will be pushed over the edge sooner or later, at which point the discussion around rate cuts can take hold.
Major support holds firm again
From a technical perspective, the NAS100 is looking vulnerable although once more it has survived the earlier scare.
Source – OANDA on Trading View
A descending triangle has formed over the last few months with the base falling around 14,500 where the index briefly dipped below earlier today.
A break below this level could be viewed as a very bearish move and a sign of further potential pain to come. While there are other past support levels that may stand out below, such as 14,250 as we saw back in June, the next major area may arguably be around 13,500-14,000.
This is where the 200/233-day simple moving average band falls which the index hasn’t traded significantly below since the start of the year.