Stocks Down, Rates Up

Coming off the long holiday weekend, despite the best efforts of the Treasury Secretary during multiple television appearances to promote imminent trade deals as well as insinuating that he may be the next Fed Chair (or shadow Fed Chair) in order to quickly lower rates, we have stocks lower and rates on the 10-Year Note higher. 

For a good while now I have been waiting for a moment when the market comes to its senses and no longer gives full confidence to politicians from both parties talking markets to exactly where they want them to go. From my perch the proverbial "X-Factor" is still the bond market, since if rates on the long end explode higher it throws egg in everyone's faces inside the Beltway, including The Fed, for just about everyone except maybe Ron Paul. 

In order for that to happen we would likely need to see rates on the 10-Year head back to the 5% level in the coming months, which is certainly possible especially if inflation surprises to the upside going forward. From a sentiment perspective it still seems like the pain trade is, indeed, higher for rates, given the ubiquitous rate cut chatter and expectations. 

On that note, REITs in the IYR ETF, a rate-sensitive sector without question, are reversing down sharply off their opening highs today. On the IYR daily chart, updated below, the reversal is occurring at both the 200-day moving average and the major resistance trend-line I have drawn in light blue.