The key level here is 5%. Whenever the 30-year has hit 5% in the in the recent past over the last few years, stocks have tumbled. They've rolled over a little bit.

But one thing that's been notable is that that weakness in stocks has been short-lived because the yields then drop back down.

Uh so why is that the case? Well, the market is worried about uh higher borrowing costs for the US government, a lot of treasury debt being issued.

And dating back to this chart here, every time that we've seen the 30-year punch above 5%, stocks have rolled over short-term, but what you're noticing here is these dips, they keep getting shallower and shallower. So what you have is actually a flag.

And now we are punching above, and if we get a really big burst uh in higher yields, that's going to weigh on stocks quite a bit. It's not just the direct level, and in fact, a lot of times it's not the level of the yield so much as the speed of the movement.

And for that, we can look at what's going on with not the VIx, we got the VIx of the bond market. And that is the Ice BVA Move Index.

So that's a three-year chart. Let me just dial that down to a three-month. And we can see that is up a little bit, not anything concerning, but uh if that were to race higher, that would probably be trouble for stocks.

Uh now let me show you a chart. This comes from Jim Bianco, Bianco Research and uh that is not the right one. There we go.

Um so on the left side, we have odds of a Fed rate uh hike in September. That white line has been dropping. It was at 100% just a few weeks ago.

Um then we got some data and it has dropped to one and three chance because the economy looks a little bit weaker, so the Fed doesn't feel the need to hike the rates. Rate hi uh raise uh raise rates as much.

But the green line is what the 30-year T bond yield is doing. And so that is going from the lower left roughly to the upper right.

So as the odds of a rate hike have been going down, we've seen uh the actual yield on the long bond, which is most sensitive, that has gone up. And as I said before, if it were to race from where it is right now, 5.3 to 5.4 to 5.5, that that presents a real problem for the government because they cannot let that uh they cannot lose control of the bond market.

So we've seen uh we've seen some rumblings of uh yield curve control. We've heard of Operation Twist and the Federal Reserve operates on the short end of the market, but these other tools are ways that the Fed might intervene on the long end of the market.

And so we're nowhere near that place just yet, but uh those are the uh possible tools that they would use to control rates uh if they had to, but I think everybody's hoping the Fed doesn't get there first. Kevin Warsh has been kind of famous for saying he likes the bond market to do his work for him.

And guess what, the bond market is sending the wrong signal for stocks right now.