Market Update – 10-year Above Key 4.00%

2:42 p.m. ET

Yields were already high and heading higher, but the news this afternoon that the Bank of Japan may “tweak” its YCC to allow interest rates on JGB’s to move above a half percent, sent bonds sharply lower over fears that the BOJ actually does tweak their Yield Curve Control and the JGB market implodes, sending global yields higher. The BOJ’s meeting is Friday, for us in the U.S. that will be tonight.

As we’ve already established, stocks and mega-cap stocks in particular, don’t like higher yields…

This is NASDAQ-100 futures (1m) and the 10-yr yield inverted so you can see the reaction to higher yields.

And NASDAQ-100 (1m) vs. USD/JPY which shows the catalyst for the bump higher in yields this afternoon (the BOJ news).

3C and prices are tracking lower, but 3C was negatively divergent with pre-market gains.

Russell 2000 futures (1m) and 3C

When I started writing this, the 10-year yield was just under the key psychological 4.00% level at 3.99, but it’s now up 16 bp to 4.01%.

Currently only 1 sector (Communications +1.1%) is higher. The other 10 are down with Utilities worst nearing -2%.

The mega-caps (MGK -0.45%) have lost most of their edge, only 30 bp better than the equal weight S&P now (from 100 bp earlier).

This may cause some big trouble on price charts. Take the S&P for example,,,

SP-500 (10m) – if there’s not some improvement before the close, we’ll have a failed breakout and confirmed bull trap by the close. That means traders/investors chasing the gap up this morning are caught at a loss and begin selling once the pain increases, which creates a momentum of its own, which is why I say that “Failed breakouts often produce fast price reversals”.