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Treasuries Continue to Negatively Diverge from Stocks

|Includes: DIA, QQQ, SPDR S&P 500 Trust ETF (SPY)

The S&P 500 index rebounded from moderate early losses to close slightly higher today, holding near recent highs of the reaction from late November and continuing a test of strong congestion resistance in the 1,260 area. Technical indicators remain moderately bullish overall on the daily chart, favoring a continuation of the advance.

The 10-year Treasury note yield moved sharply lower today, continuing the negative divergence that began last week with the formation of the latest Short-Term Cycle High (STCH) in yields.

This negative divergence is a warning sign that indicates a short-term reversal in stocks is becoming more likely. The S&P 500 has reached an important inflection point with respect to the development of the current short-term cycle and market behavior during the next several sessions will likely swing the odds in favor of one of the scenarios that we have been monitoring for the past several sessions. We will identify the key developments as they occur in our daily market forecasts and signal notifications available to subscribers.

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