I previously stated I was expecting weakness for treasuries prices as the stock market was supposed to rally and the economy was lined up for a little bounce. The stock market hasn't rallied and t-notes were mostly up and in a range. Here is a chart of the September contract for the 10 year t-note:
Since I still believe we are in for a bounce in the economy I will interpret this range as distribution before a correction. I have highlighted similar previous cases by the red segments. This would suggest a rally in the stock market also.
The action on Friday is adding to the bearish case for treasuries. As the stock market was making new lows, the treasuries were sitting in a small range (green box below). Then as the stock market started a small rally, the treasuries sold off hard (red segment), approaching the bottom of the range on the daily chart, more consistent with the SPX at 1100 then at 1070.
This is an indication that investors have started to bet on a bouncing economy or at least on benign inflation data. The stock market should start moving up. From what levels, it is still to be seen. I have rarely seen important bottoms develop during lunch time and that is when the spx started to rally on Friday
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