Very Scary Mouse: S&P 500/U.S. 10-Year Yield Chart

2022.05.18 09:15

If I was a bull (I’m not) and if I wanted to scare the bejesus out of the bears (I don’t), I would show them this chart:

SSPX/FR Chart

It is, of course, my concoction known as the MICE (Most Important Chart Ever), and as you can plainly see, it has come into contact with the lower boundary of its multi-decade channel.

For newcomers, this chart represents stocks (by way of the S&P 500 cash index) divided by a major interest rate (the 10-year yield on US Treasuries).

In doing this boundary, provided it doesn’t break it, what it suggests is:

1. Stocks have bottomed; or
2. Interest rates are going to decline; or
3. Both

Of course, not all is necessarily lost in bear-land, for there are other possibilities:

1. The channel could break (which would be a big deal, considering its age);
2. Rates could decline substantially, giving “room” for stocks to fall more without breaking the channel

In any case, after a dispiriting few days, it’s just one more thing to worry about.

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