10-yr Yield Pop Could not Spook the Bulls… Yet!

The action yesterday by the bulls was impressive, shaking off a 20 point pullback in the S&P 500 ($SPY). This defense by the Bulls is impressive and short-term breadth indicators continue to be bearish. If you look at the AD percentage for offensive sectors you will see three offensive sectors in downtrends, and two flat.

While the selling pressure is not intense it still has the short-term momentum despite the bounce. The S&P 500 ($SPY) has been  volatile for the last five weeks with four 2 percent intra-day moves in that time frame. But, and there is always a “but”,  the S&Ps refuse to break down and that needs to be respected.

Tech ($QQQ) on the other hand has fell into Friday’s gap zone to affirm resistance, $109 on the $QQQ, and the short-term downtrend. This could weigh on any further market upside conviction, potentially putting pressure on sectors like Semiconductors ($SMH) and Hardware.

Small-cap ($IWM) volatility has started to pick up in May and the index remains below its short-term support break of $124, which is now considered resistance. This could be the Red Flag that not is all well with the US domestic economy, so keep an eye on Small Caps.

Bonds ($TLT) continue to hit new lows and remain in a short-term downtrend. If the 10-yr yield starts to challenge 2.5 percent, currently at 2.259 percent, that could get extremely troublesome for the bullish contingency.

The Dollar ($UUP) is firming, but remains in a short-term downtrend. The weakness in the Buck has been a catalyst for Oil ($USO) which is testing the pennant breakout and remains in a short-term uptrend.

Finally, Gold ($GLD) has a thin breakout to the upside. But Gold Bugs should not become too excited, $GLD remains within a downtrend that started in the beginning of April.

Have a great trading day!