Pigs Diverging the 10yr Yield

As noted in this week’s NFTRH US & Global Market Internals segment, an important leader is failing to lead. That is all the more notable because said important leader is the Bank sector, which is normally well correlated to long-term interest rates.

What is up with this disconnect? What is KBE/SPY telling us about the yield and/or the state of economic health if the yield keeps rising? Is this a divergence to a deflationary outcome, where yields tank and long-term bonds get bid? Is it a precursor to a big breakout in yields and new bear market in bonds? If so, the Pigs should love those higher interest rates on the long end, unless they are projecting a grinding halt to a leveraged economy that can ill afford a real rise in interest rates to traditionally normal levels.

A lot of questions here, I grant you. They’ll continue to be asked as long as this divergence lasts.

kbe/spy ratio

Nominal KBE is no thing of beauty either, as it’s currently stuck below the 50 and 200 day moving averages. It’s a neutral chart considering said SMA 200 is sloped upward. But it really should take back those moving averages to be constructive again.

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