28Sep3:32 pmEST

Enough of the Nonsense

In an interview on CNBC this morning we saw Wharton Professor Jeremy Siegel declare that the stock market will surge in 2021 regardless of whether Trump or Biden wins. In and of itself, that is not really news to any of us who have followed him over the years, despite the catchy headline (Siegel is pretty much a perma-bull). 

More telling, to me at least, was a comment the professor made in passing during the interview, which seemed lost on many. 

Under his breath at one point, he was asked about the bond market and the stagnancy of the price action of late. To paraphrase him, he said something very close to, "It is almost as if The Fed controls the price, but they don't." 

That pretty much sums up sentiment regarding bonds these days--The prevailing thought that rates are staying low indefinitely because that is what The Fed wants and that is what they will do.

But what if the bond market revolts? That is a theory I have been toying with for years, occasionally probing. And I am doing so again, mostly based on the technicals this time and not some passing fancy. 

On the TLT (ETF for Treasuries) daily chart, updated below, a multi-quarter double-top is in play with the recent bear pennant highlighted as a nice short entry to attempt to front-run a prospective breakdown. As this chart goes lower, rates go higher. 

Whether or not The Fed has the actual force to keep rates low as long as they wish (they said three years) remains to be seen. But I do think if energy, perchance, bottoms here, it would coincide with a spot for rates to rise in the market as money rotates to inflation types of trades. 

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