The bond market is our early warning indicator for interest rate direction. The rate we like to watch closely is the 3 month Treasury Bill. In the past month it has, on a percentage basis, exploded. Because the rate was nearly zero in January, and is now 0.16%, it does not seem like much of a move. However, this early signal is above the 50 day MA and rising rapidly.
We anticipate that the large sovereign debt the US is carrying will further push rates up across the yield curve.
In particular we are watching with great interest, the impact of the UK election on May 6 and the effect of Greek bond sales during April and May.
While we have been anticipating the stock market to roll over for a couple of months now (and we admit we have called this too early), it has continued marching higher on thin volumes, significant moves in both the long and short end of the bond market could quickly deflate US stocks.