TEN-YEAR YIELD NEARS 5% -- S&P 500 CONTINUES TO TEST MAJOR SUPPORT

NEARLY AT 5%... Previous messages have mentioned 5% as the next major upside target for the 10-Year Treasury yield.   The TNX hit 4.99% today.    Chart 1 shows the next potential target at 5.25% which was the closing high formed sixteen years ago.  That previous peak may provide some overhead resistance which could slow or stall the rise in bond yields.   In the meantime, rising yields still present a headwind for stocks.  No major trend changes, however, have taken place.

S&P 500 REMAINS ABOVE 200-DAY AVERAGE...The last message on October 6 pointed out that both versions of the S&P 500 needed to remain above major support lines.   So far, they've been able to do that.  The daily bars in Chart 2 show the SPX having bounced off its 200-day moving average (red arrow) and a rising trendline drawn under its October/March lows.  Chart 3 gives a closer view of that test and shows the SPX meeting resistance at its 50-day average (blue arrow).   The index also remains below a falling trendline drawn over its July/September highs.   Until those resistance lines are overcome, the strength of the recent rebound will remain in doubt.

EQUAL WEIGHTED VERSION ALSO TESTS IMPORTANT SUPPORT... Chart 4, which was included in the previous message, shows the S&P 500 Equal Weighted Index testing major support along its spring low.   As explained on October 6, the inability of the SPXEW to exceed its February high in late July (red arrow) marked a top in both versions of the S&P 500 and pushed both into important tests of support.   That makes the test of the lower (green) trendline by the Equal Weighted index important both for itself and the S&P 500 Cap Weighted Index.   Both are likely to succeed or fail together.