The relief was palpable in US equities yesterday when the US Treasury concluded the week’s sale of $104 billion worth of Treasury notes. The last in the series auctioned yesterday - a 7 year note - came in with a much higher bid to cover ratio than average and this allayed fears, at least for the time being, that there is a diminution in appetite for US public debt.

Just to show that market participants have very different views on the direction of the Treasury market here are two comments from analysts reported this morning by Bloomberg:

“The future auction sizes may be large but there’s also huge demand,” said Yasutoshi Nagai, chief economist in Tokyo at Daiwa Securities SMBC Co., part of Japan’s second-largest brokerage. “I’m bullish on the Treasury market and the trend is for yields to go down.”

Ten-year yields may fall to as low as 3.20 percent during the next two months, Nagai said.

But just to show how varied opinions are, the next analyst has diametrically opposed views:

“I wouldn’t recommend U.S. dollar assets: Treasuries or stocks,” said Masayuki Senda, who helps manage $2.6 billion of assets as head of portfolio management in Tokyo at Fortis Investments Trust Management. “The U.S. budget deficit has increased currency risk for investors.” Ten-year yields may rise to 4.2 percent by October, he said.

As I have discussed in Long/Short Market Dynamics, the key to market liquidity is exemplified in such adversarial views. So for the time being President Obama, who recently intimated that the size of the public debt could keep him awake at night, can sleep more easily.

The S&P 500 (SPX) staged a decent rally of more than 2% and erased all of the gains of the week so far allowing the index to open Friday’s session almost exactly where it finished last Friday. Volume across the board was very subdued, and in harmony with my comments from last Monday, the last few days of the quarter are commonly periods when cosmetic adjustments are made to portfolios.

We shall have to wait to see what a new quarter brings next week. I will, however, not be publishing again until Tuesday July 7.



The CBOE Volatility Index (VIX) closed at its lowest level since last September.

There is an interesting article about seasonality in the VIX here and in a nutshell the findings, in what is an interesting analysis, are that a trough is to be expected in the VIX in June with a notable pick-up, on a seasonal basis, over the next three months.



GDX, providing exposure to the gold mining stocks via an exchange traded fund, continued its rally as anticipated here yesterday but as with all charts that I have scanned this morning the volume levels are not indicating that there was a great deal of conviction behind most of the price action.



XBI, a biotech fund, peeked above its 200-day EMA yesterday and could be on the verge of a breakaway from a cup and handle formation, but this interpretation also has to be tempered by very light volume.



KBE, the exchange traded fund for the KBW Banking Index, has an almost horizontal pattern extending back six weeks and the volume yesterday was less than half of the daily average.

The close is still within the green cloud and the near-term direction should be considered to be tentative until the uncertainty in direction is resolved one way or the other.



RTH, which tracks the retail sector, staged a sharp reversal yesterday as it has been making its way towards the lower boundaries of the green cloud pattern on the Ichimoku chart.

The move lacked the significance it would have had if the volume had shown more conviction.



Clive Corcoran is the publisher of TradeWithForm.com, which provides daily analysis and commentary on the US stock market.