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“Simple can be harder than complex: You have to work hard to get your thinking clean to make it simple.” – Steve Jobs
Major US equity indices are on pace to open at new record highs this morning after futures have traded higher all night. Over in Japan, the Nikkei traded to its best level in more than three decades, and European equities are also trading higher. Treasuries, on the other hand, have seen a bit of selling pressure as yields are modestly higher. There’s little data again this morning, so if the market is going to focus on anything, it will be how the Senate reacts to the passage of a measure in the House to increase the already passed $600 relief payments up to $2,000.
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While equities are poised to open at record highs, US Treasuries have been stuck in a steady downtrend for months now. The charts below of the US Treasury Long Bond future show its daily performance over the last six months (top) and the intraday performance over the last fifteen trading days (bottom). A quick look shows two similar trends – a steady stream of lower highs. If you look a little closer at the intraday chart at the bottom, though, the Long Bond future showed some signs yesterday of attempting to break its downtrend. Yields are higher this morning, so at the outset, there won’t be any follow-through to yesterday’s test, but if prices reverse course and rally today, there just might be a contra-trend rally to close out the year heading into 2021.