Stocks Flop 2022 As Real Yields Rip

09/24/2022

1 minute read

2022.09.24 01:58

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Michael Kramer

Stocks finished yesterday lower as rates pushed higher. Where stocks go from here will depend on rates, I think it comes down to that. Based on current rates, I don’t think stocks have fallen enough. The simple to relationship shows that the TIP is now trading at its lowest level since 2018 on an unadjusted basis, and since rates are heading much higher than they were in 2018, the TIP ETF should probably be much lower.

It doesn’t mean the QQQ ETF should trade at its 2018 lows, but it suggests the QQQ isn’t finished falling. But the fact that the TIP ETF made a new 2022 low indicates that the QQQ should be making a new 2022 low. The chart below shows the QQQ on a 12-day offset to the TIP ETF, and the move down in the QQQ seems to be on schedule.

QQQ Daily Chart

The exciting thing about the TIP ETF yesterday was a 10-year TIP auction priced at 1.24%, below the 1.28% when issued rate. That means the auction had a solid demand for the new bond issuance. When this happens, it causes the yield of the bond trading in the market to drop. You can see this on the TIP chart when the price rockets higher at 1:00 PM, indicating that the rate is falling. But look at what happens later in the day because the price craters, meaning the yields started rising again and went above the when-issued rate. So whoever participated in the auction was down just an hour later. That is pretty amazing to me.

TIP ETF Chart

Capital One

Capital One (NYSE:) broke support yesterday, which I think is a pretty big deal, considering how it held there for so long. Momentum is bearish, and support is a long way off.

COF Daily Chart