Could a near-term rise in yields finally break the bond bull and send money flowing into stocks? MoneyShow's Tom Aspray shares the key levels to determine whether this long-term trend is finally reversing.
As we head into the final two weeks of January, analysts are more hopeful about the stock market in 2012. Many believe that if stocks close higher in January, it is a positive sign for the whole year.
So far, it has been a very good month, as the Spyder Trust (SPY) is up 4.1% and the SPDR Diamonds Trust (DIA) has gained 4.2%, topped by a 5% gain in the iShares Russell 2000 (IWM). The tech-heavy Powershares QQQ Trust (QQQ) continues to lag, up just 3%.
The sharp uptick of interest rates in the first few days of 2013 had some bondholders worried, but since then rates have drifted slightly lower. The positive action in stocks last week may have tempted a few bondholders to consider stocks. but it will take more conclusive evidence of higher rates before they are ready to sell their bonds.
Still, it is important to know what key interest rate levels that an investor should watch in order to identify changes in the trend for either short or long term rates.
Chart Analysis: The weekly chart of the ten-year T-Note yield (TNX) shows the high in yield at over 5% in early July 2007.
The daily chart of the ten-year T-Note yield clearly shows the uptrend (line h) from the July 2012 lows.
NEXT: What 30-Year Rates Can Tell Investors