09Oct10:56 amEST

A New Market Cycle Officially Hatches

With the Fed now in a tightening cycle, the last few weeks seem to drive home the point that Treasuries and stocks will now likely be moving in unison more than at any other time we have seen in a while. In other words, stocks will likely be trading inversely to rates on some level, as the TLT and SPY correlation seems to be in lockstep. 

Just this morning, for example, equities are overcoming a soft pre-market futures tape for a reasonably broad-based bounce as TLT shows its first sign of relief in a few weeks. 

On the daily timeframe for TLT, ETF for Treasuries, below, the swoon below $117 prior support sure was a doozy, catching even long-term bond bears like myself off-guard with how quickly they sold off after the recent FOMC rate hike (I had expected a quick shakeout of shorts first via a squeeze higher).

While this is still a working thesis, I want to gauge how sensitive equities continue to be to the current TLT bounce attempt. If Treasuries get some legs and rates come in a bit, then relative standouts like BMRN HABT WING, select energy plays, and others, may have a chance to flourish before we get to the heart of the coming earnings season. 

Either way, it sure seems like the days of TLT functioning as the proverbial safe haven and rising on those days when equities sell off are now behind us--A new market regime has likely been hatched, for better or worse. 

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