U.S. Treasurys have likely reached a bottom. But stocks have not, technical analyst says.

By Frances Yue

U.S. Treasurys have likely already reached a bottom, while stocks have more room to fall, according to Jonathan Krinsky, chief market technician at BTIG.

Bonds have shown signs of a washout with the iShares 20+ Year Treasury Bond ETF TLT, which tracks the performance of long-term Treasurys, saw the heaviest volume last week in its history, Krinsky wrote in a Sunday note. "Back-to-back record volume weeks for TLT culminating with one of the highest volume days on record on Friday. If this isn't capitulation, we don't know what is," Krinsky wrote.

Long-term Treasury yields have recently climbed to over-a-decade highs, with the 30-year Treasury yield BX:TMUBMUSD30Y rising over 5% on Friday to its highest level since 2007, according to Dow Jones market data. The U.S. Treasury market is closed on Monday for Columbus Day and Indigenous Peoples Day.

"We continue to believe we are entering a period where the bond/stock correlation will flip and we will see rates fall with stocks," noted Krinsky.

For stocks, Krinsky said they continue to expect the S&P 500 to fall below its psychological level at 4,200, while it won't be surprising for it to test its 20-day moving average at 4,357 early this week.

For stocks to reach a capitulation phase, there needs to be over 25% of the S&P 500 stocks to see a 52-week low, according to Krinsky.

U.S. stocks traded lower on Monday, with the Dow Jones Industrial Average DJIA down less than 0.1%. The S&P 500 SPX dipped 0.2% and the Nasdaq Composite COMP fell 0.6%.

-Frances Yue

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10-09-23 1224ET

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