|
PureBytes Links
Trading Reference Links
|
If bonds break from current levels just under 120, down to 104, that's
roughly a 13% price drop - which would drive interest rates up to the 6.5%
level. At 6.5%, the average home buyer is going to be able to buy 13% less
total home square footage, 13% fewer cars, etc. Effectively, 13% of the
average borrowers marginal free income stream is going to be taken out of
commission. And this is the credit fuel that drives the interest-sensitive
portions of our economy that make the difference between growth and recession
( and thereby the difference in the direction of stock prices) . An 80 basis
point interest rate hike is amply enough to grind this economy to a soft
landing pancake if not worse. In today's economy, an interest rate change of
even 20 or 25 basis points can make a serious change in overall activity.
THIS is where technical analysis benefits from some "tempering" by
fundamental analysis.
|