Intraday market notes & observations – June 1

1:15pm ET: When is FLAT not flat?
The answer is: When it’s trending. In case you don’t know FLAT is the symbol for the iPath US Treasury Flattener. Got that? I didn’t think so.

According to the fund, its goal is “to replicate, net of expenses, the inverse performance of the Barclays Capital US Treasury 2Y/10Y Yield Curve index. The index employs a strategy that seeks to capture returns that are potentially available from a “steepening” or “flattening”, as applicable, of the U.S. Treasury yield curve through a notional rolling investment in U.S. Treasury note futures contracts. The level of the index is designed to increase in response to a “steepening” of the yield curve and to decrease in response to a “flattening” of the yield curve.”

From the daily chart shown below, it’s clear that the yield curve is steepening and has been since April as FLAT has risen nearly 9% since then. Today, it jumped another 1.7% breaking near-term resistance. This is a signal that FLAT will continue to rise meaning that we can expect the yield curve to continue to steepen. This might explain why so many longer-term Treasury funds are breaking out of their bases today.

12:30pm ET: Intraday support/resistance:
SPX 1321/1345
DTX 534.5/547.5
DJIA 12330/12570
Nasdaq 2795/2835
OEX 586.75/597.25
VIX 15.95/17.25
Trin range: 1.30 – 2.20 (bearish, above 2.20 becoming contrarian bullish)
Average VWAPs: +26/-100 (bearish)

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