Happy Monday --- US stock's comment + 10 year yield chart overview

The S+P500 had a roaring week last week. The move exceeded my expectations for the bounce and slightly calls into question my more bearish stance. In particular in relation to the comparison overlay with the 2008 which I alluded to in my S+P analysis of last week (The overlay can be seen by clicking on this link). - I never look at these comparisons with expectations of exact repetition, rather I like to see a rhyming behaviour, to that extent this week should shed more light on whether or not this continues. A move over 1090/1100 will lead to me to view this overlay comparison as over, however a week of sideways action with 1070/1090 largely capping and a drift back towards lower levels towards the end of the week, will lead me to think the bearish (or even ultra-bearish scenario may still be prevalent).

FWIW two big flags were raised last weeks in terms of market calls by prominent market commentators:

1) Bob Prechter was all over the press last week calling for a dramatic drop to below 1000 in the Dow over the next few years. I followed Prechter a few years ago and quickly wished I had not. (BTW, I do not personally see how stocks can drop to the sort of levels he is talking about in a world where the monetary spigots can be turned on as opposed to the early 30's where the Gold Standard restricted the central bank's ability to help.)

2) Doug Kass called for a Major Bottom for stocks for the year. Doug Kass is a commentator who I have enormous respect for, and have followed for years. He was one of the first commentators I remember highlighting the sub-prime crisis well in advance of its onset. Also he called the major low in stocks in Mar 2009, suggesting it may be a once in a lifetime generational low. So when he talks I tend to listen. However Doug Kass like most commentators only has a partial success record, in August last year he called for a top in stocks for 2009, missing the subsequent 15% or so of gains in late 09. More significantly however is his July 2008 call where he said Stocks have bottomed for the year. His timing was nice in one sense, in that the S+P put in a decent bounce in mid-July 2008 into mid-Aug, not unlike the current bounce following his most recent comments. However from mid-Aug 08, it was down, followed by hard down in Sep/Oct 2008. Interestingly, his July 08 call, and his Jul 10 call occur at virtually the same point on the overlays. - I have shown this on the following chart (Click charts to enlarge):
Moving on the US 10 year yield: Last week, as US equities rallied, the US 10 year note sold-off, and the yield has moved back towards the 3.05% yield level. This was my line in the sand on the way down and a clear break below here triggered the sharp decline to 2.88%. I would expect 3.05% now to cap as resistance, though a minor break may see a push up to the 3.10/.11% low of the big multi-month Double Bottom low. Any moves through 3.10/.11 will call into question the more bearish view of lower US yields, which looks for a decline over the next few months to the low 2's. -- I am posting some charts below, the first chart shows the current stance of the 10 Year Yield, highlighting the big Double top at 4%, and the recent break of the 3.05/3.10%. I have have also highlighted a Bullish Divergence which occurred in recent weeks.
The next set of charts shows a comparison I have been using on the US 10 year yield. The top chart is the 2000-2003 decline in yield, the next chart shows the past few years. Both charts show a similar formation; in both cases the 10 year yield appeared to form inverted Head & Shoulders patterns, in both cases these patterns failed to follow through and reversed. -- In recent weeks we have broken below the low of the Right Shoulder of this pattern. When this occured in 2002, the price and momentum action was very similar, with bullish divergence forming. I highlight this because it shows the on-going similarity of these charts. Once again, there is no guarantee this similarity will continue, however if it does it fits in with the big Double-Top bearish view on the US 10 year yield, and I would assume this would be consistent with continued lower stocks. (CLICK ON CHARTS TO ENLARGE).