S&P 500 Breaches June Low: Why PreMarket Prep Is Watching This Bond ETF

Let”s cut to the chase. Long before the Fed heads made their hawkish comments Tuesday morning, we all knew what is plaguing this market: rising interest rates.

The acronym TINA —There Is No Alternative — to the stock market applies here, and all types of investors are flocking to some kind of yield.

Another False Rally: Before the opening Tuesday, investors were hoping the S&P 500 index could break its miserable five-day losing streak. Going back further, the index has been in the red in seven of eight sessions. The recipe for a rally was there.

Stock index futures were noticeably high as the greenback was in the red, and the iShares 20+ Yr Treasury Bond ETF TLT was trading higher.

As a rule of thumb, if you anticipate interest rates to rise in the future, you do not want to own any long-term bonds such as the TLT, which is a 20-year.

PreMarket Prep Plus Discusses The Turn: During a brand new segment of PreMarket Prep Plus, which was at 10 a.m. Tuesday, co-host Dennis Dick discussed the turn in the TLT that made him skeptical of the premarket rally.

“We had a turn late in premarket trading in the TLT, in fact, I tweeted it out, that is when the TLT started rolling over,” he said. “A few minutes ahead of the open when TLT began to sell off, I thought the indexes may follow it lower.”

$TLT rolling over again. This is why stocks are starting to leak.

— Dennis Dick, CFA (@TripleDTrader) September 27, 2022

Dick concluded: “If the bonds cannot stabilize, then the market is going to continue lower. We all are worried about interest rates, and they are going higher.”

The author of this article noted the U.S Dollar Index DXZ was catching a bid as well. One of the key ingredients to the bear market has been the strong dollar, and there seems to be no end in sight to its relentless uptrend. June Low Breached: The bears did not have the market come down this far and not take out the June low. While the index managed to stay in the green until 11 a.m., AM the bears went on the prowl and the all-important June low has been breached.

As of 2 p.m., the index has made a new low for the year at 3,636 and is not far off that level. The entire PreMarket Prep Plus Covers The Segment can be found here:

Photo via Shutterstock.