It’s been almost three weeks, but we might finally see a backtest of the SMA10 if ES isn’t able to hold its neckline at 2940.Why now, when the Q2 close is right around the corner?  Blame it on the German 10Y.

As we approached the end of Q1, the US 10Y bounced for almost two months — propping up the USD and thus stocks. But, back then, Bunds were around -4bps.

This time around, Bunds are at -33 bps.  The US 10Y bounced for a grand total of 3 days before slipping back below 2%.

Our yield curve model has been eerily accurate for well over a year. I don’t expect that to change any time soon.

continued for members…

This is higher initial support than we expected yesterday, but only because the SMA10 is rising so rapidly.

As rates continue to slide, we’re seeing the EURUSD continue to push above its SMA200. DXY, whose rising white channel broke down last week, could fall sharply if the red TL/purple channel line support at 95.48ish breaks down.USDJPY hasn’t been any help in propping up the dollar.

It’s also affecting GC, which has continued to nudge higher since breaking out past horizontal resistance at 1373ish.  As we discussed last week, if EURUSD had reversed at its SMA200, DXY would have remained in its rising channel and GC would have been constrained.  But, that’s wasn’t in the cards.Both the 2Y and 10Y have broken down… …and the spread between them is growing.The other issue is that CL and RB have run out of upside room. And, leadership has become increasingly narrow — with our two favorite stocks (not!) continuing to look weak.