Bond Yields Are Rising: What's The Impact On Stocks?

(Source: Option Generator Research)

Crown Castle International

Let's now turn to CCI, a REIT. In this case, we see more extremes, especially to the upside. As such, CCI can be considered a bond-proxy stock which doesn't mean it's a bad investment during periods of rising interest rates. If you want to own a 3+ % yielding dividend stock with an annualized growth rate of 8%, then CCI is a better long-term opportunity than TLT.

(Source: Option Generator Research)

Nasdaq-100 (QQQ)

Looking at the Nasdaq-100, we generally notice strongly negative correlation. Stated differently, if one expects bonds to drop, the Nasdaq should be able to keep its head up.

(Source: Option Generator Research)

Technical Analysis of the Stock Market: Interesting Items to Keep an Eye on

The Russell-2000 - the US index filled with regional banks and small caps - continues to demonstrate strength relative to the Nasdaq and high-quality momentum stocks. The Smoothed Stochastic Oscillator will be a key metric to watch closely as it might signal a new long-term bull run in cyclical small caps. This, in turn, doesn't necessarily mean that growth stocks are going to decline significantly; as members of Option Generator already know there are always opportunities available on our watchlist which doesn't target cyclical stocks.

(Source: Pro Realtime)

The fact that the technical picture for bond prices looks gloomy and supports the Russell 2000, big tech stocks are also set to break out above their continuation pattern. Adding the reverse SHS confirmation to the equation and a new rally in the Nasdaq may be just around the corner.

(Source: Pro Realtime)

Interest rates seem to rise even more if and when we clearly break below $157.05. This move might result in relative underperformance for bond-proxy stocks (as highlighted above).

As such, we're overweight the strongest tech names with various option strategies, while keeping our exposure to real estate limited.

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