There is no denying that the Mario Draghi comments have caused a massive rally in the stock markets this morning. The important and highly followed SPDR Dow Jones Industrial Average (NYSEARCA:DIA) is trading higher by nearly 2.00 percent on the trading session. Many European stock indexes such as the iShares MSCI Italy Index (ETF) (NYSEARCA:EWI), and the iShares MSCI Spain Index (ETF) (NYSEARCA:EWP) are trading higher by over 6.00 percent this morning.
Normally, a rally of this size would cause the bond market to sell off, however, that is not exactly the case this morning. Today, the important iShares Barclays 20+ Year Treasury Bond (ETF) (NYSEARCA:TLT) is trading lower by just 0.58 cents to $131.56 a share. Usually, money will come out of bonds and travel right into the riskier stock market. When bond prices go higher it is generally a sign that the institutional money is seeking safety and security. This is really not much of a sell off in bonds today. Short term day traders can watch for intra-day support on the TLT around the $131.00, and $130.00 levels.
Should the TLT decline further today it would be telling us that some institutional money is fleeing the bond market and possibly going into stocks, however, today’s bond action is not saying that so far.