Prices remain below their May 21 high; now 14 trading days later, the S&P500 has lost 1.58 percent. All this while short term interest rates are moving higher. The ten-year Treasury, as traded in the CBOE market, closed today at 2.21 percent. That is far below its low of 1.63 percent at the beginning of May.
Yet despite this 26 percent interest markup, fears continue that the Fed will continue to move interest rates higher. That’s bad news for the stock market, since all capital values –not just US Treasury prices- fall when interest rates rise.
Our diagram shows today is in close parallel with the last two bull markets. The most important feature of these time paths is that prices do not collapse after these highs, but rather decline moderately as they start on their way down.
Accordingly, the fact that a sharp correction has not hit this market is not assurance that the top remains in the future and that prices will continue higher.
DJIA -.06 percent
NASDAQ .29 percent
S&P500 -.03 percent
