U.S. Treasury Yields Rise, Yet U.S. Stocks Rally Stronger? Senior Trader Warns Nasdaq Rebound Could Be a Bear Market Trap

Author: Maggie Lake, The Market House

Compiled by: TechFlow

TechFlow Summary: Against the backdrop of the Federal Reserve's rate-cutting cycle beginning and massive global asset turbulence, the long-standing correlation logic between US stocks and US Treasuries is undergoing a profound reversal. In the past, rate cuts driving yields down typically benefited risk assets, but this cycle has seen lower yields accompanied by severe stock market sell-offs, while yield rebounds have anomalously boosted risk appetite.

Dale Pinkert, a senior macro analyst with decades of floor trading experience, has comprehensively reviewed the inflection point logic for US stocks, Treasuries, the US dollar, Nvidia, and agricultural products based on recent market trends. He bluntly stated that the Nasdaq's short-term strong recovery resembles more of a bear market rally, and has outlined key support levels and trading boundaries for investors to guard against a secondary decline.

Dale bluntly remarked that, facing such violent market volatility, he might need to visit a chiropractor next week to properly fix his neck.

He pointed out that the Nasdaq index hit its daily limit down once last Thursday, and witnessing such an intense violent rebound within just 72 hours is extremely rare (this statement was made before Nvidia officially announced Jensen Huang's departure).

Latest Update: Jensen Huang has now officially announced his resignation.

Dale emphasized that every investor should currently ask themselves: Did my holdings really participate in this rally? Have they already recovered at least half of their losses from the past month?

If your portfolio hasn't kept pace with the index at all, and given that the S&P 500 likely has only about 100 points of rebound space left above it, once the broader market resumes its downward trajectory, these weak holdings will face significant risks.

Because they lack both rebound momentum and relative strength equal to the index, they are highly likely to break directly below the lows set last week.

S&P 500: Is it Heading Toward the 7,000 Mark?

Although there may still be some upward momentum for US stocks, Dale's current baseline assessment is that after thoroughly clearing out liquidity at the lows, the S&P 500 index is ultimately poised to launch an attack on the 7,000 level.

"However, the S&P 500 is already considered one of the strongest-performing indices right now," Dale commented. "This round of recovery in the Nasdaq looks much more like a bear market rally."

"As for the Russell 2000 index, it is merely holding on by a thread, and it's difficult to expect it to reach new highs. On the Russell's bounce, I lean toward short-selling around $290."

Bond Market: A Paradigm Shift in Stock-Bond Relations?

Regarding Treasury yields, Dale stands by his previous forecast, expecting the 10-year Treasury yield to climb into the 5.10% to 5.15% range.

He believes the stock-bond relationship has undergone a profound paradigm shift. Previously, when interest rates fell (as shown in the chart below), the broad stock market instead faced heavy sell-offs.

"The current logic has almost evolved into higher interest rates actually leaning positive for the stock market," Dale analyzed. "The underlying trade expectation is: inflation implies economic expansion, and higher yields represent growth expectations."

"You can clearly see that the 2-year Treasury yield is leading the field," he noted. "From a technical standpoint, yields breaking out to new highs is heavily favored."

Looking at the performance of Treasury ETFs (TLT), Dale points out that the current yield curve clearly exhibits a structural characteristic of the short end being tightly squeezed while the long end remains relatively mild and accommodating.

"When the 10-year Treasury yield reaches 5.10% to 5.15%, it could become an excellent opportunity to initiate a long position in TLT," Dale said. "If the long-end rates top out at this level and begin to retreat, this risk-on rally may also come to an end."

"These days, it seems higher yields actually stimulate stock markets higher. Bonds are turning into negatively correlated opposing assets, a scenario that has never occurred over many past years."

Nvidia: “The Most Expensive Sex Scandal in Global Commercial History”

Note that the chart below records market action prior to Jensen Huang being exposed for his second extramarital affair scandal yesterday; the market widely expected the stock to face heavy selling pressure that day.

Dale bluntly stated that this ranks as "the most costly sex scandal in all of human history."

However, well before these scandals unfolded, Dale had already turned bearish on Nvidia. When Nvidia's stock price was previously at its high of $240, his technical target had already been lowered to $190.

He pointed out that Nvidia has an extremely crucial support base around $173. "Bulls must build a defense line here and hold the ground." (The stock had already plunged significantly in early trading that day.)

US Dollar Trend: Strong Pattern Has Not Peaked Yet

"Among current macro assets, the US dollar remains unquestionably king," Dale commented.

"The current market shows absolutely no signs of topping. Although I am not currently establishing a long US dollar position, I would absolutely not choose to short the dollar at this level."

AMD: Bottoming Process Has Not Truly Ended

Observing the daily Relative Strength Index (RSI), Dale believes AMD has not yet pinpointed the final market bottom.

"From a technical pattern perspective, there is a high possibility that the previous low bullish candle is merely a local phase low, rather than the true historical bottom," he analyzed. "I definitely would not blindly chase highs here; I suggest observing the buying support when it retraces 50%."

Agricultural Products: Correction Over, Time to Re-establish Long Positions

In the commodities sector, Dale believes the previous correction may have come to a close, making now possibly an ideal window to re-allocate into agricultural sectors.

Using white sugar as an example, he stated: "I believe it's perfectly fine to buy white sugar at current prices and trade swing moves with tight stop losses. A bullish reversal pivot is firmly establishing on the chart."

Regarding wheat, he believes the market bottom has basically been found:

Soybean contracts experienced a violent surge on Tuesday, directly hitting the daily limit up restriction intraday:

Meanwhile, corn recorded a highly powerful single-day performance following the release of crop reports, with its bottom structure similarly becoming increasingly clear:

Precious Metals: Silver May Outperform Gold

Regarding precious metals, Dale believes the bottom for this round for platinum and palladium has basically been established.

Furthermore, the Gold/Silver Ratio may currently be forming a periodic top region.

However, he simultaneously cautioned that the precious metals sector could still experience a secondary dip and washout in the future. "I am closely monitoring who will take the lead on the charts first."

"If silver's continued resilience against declines and buying support keeps outperforming gold, then this will be a highly persuasive chart signal for me, pushing me to favor going long on silver rather than gold."