Markets, even in the unprecedented moves of this year, do not move in straight lines. A trending market will move, move, move and then, suddenly, seemingly, will move in the opposite direction.
This is how markets move and lately it has been sideways. For bonds, we might watch the US treasury ten year note yield. On June 14th the yield hit a new high yield of 3.50% (all yields/prices per Bloomberg) which also means it was a new low for price. It was a new high for yield (low for price) that had not been seen since 2011. The opposite, seemingly, of the low yield (0.31%) and high price extreme of March 2020, the end of the bond bull market. And yet, over the following days, yields suddenly reversed course, plunging to 2.74% on July 6th. It has been sideways since.
I bring this up because stocks, suffering an unprecedented decline this year, hit their low on June 17th with the S&P 500 Index hitting 3637, a steady decline from the 4818 high of January 4, 2022, for down 24%. The decline has ended, seemingly, and since June 17th stocks bounced. It has been sideways since.
In a downward trending market, the type of market bonds and stocks now find themselves, corrections are upward moves in price. Lately we are not marking new price lows in these markets; we are moving sideways. This period is a correction of the new downward trends for bonds and stocks.
Corrections can confound traders. Suddenly, their trades are not working for them, but instead the trades are working against them. It is a gut check: continue with the trade in the hopes the correction is temporary or reverse their trade and risk a whipsaw effect.
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