“This forecast depends on the U.S. Dollar Index, which appears to be tracing out a double top,” the committee added. Stocks and the dollar have tended to move in opposite directions lately.
PowerShares DB US Dollar Bullish (NYSEArca: UUP) gained 0.5% on Thursday.
Meanwhile, from a technical perspective, S&P thinks Treasury bonds look “very susceptible” to a major correction.
“The 10-year Treasury yield is working on an inverse head-and-shoulders formation and would be completed by a move above the recent high of 2.4%. Sentiment toward Treasury bonds has been bullish for months, while Commitment of Traders (COT) data is becoming unfriendly to Treasuries, in our view,” the committee added.
The iShares Barclays 20+ Year Treasury Bond (NYSEArca: TLT) gained 1.3% on Thursday. [Investors Bet Against Treasuries with ETFs]
