Monday, January 28, 2013

TNX 10-Year Treasury Note Yield Daily Chart Hits 2% Intraday Negative Divergence Upward-Sloping Channel Cup and Handle Potential Island Reversal

The 10-year yield hits 2% intraday not seen since April 2012, nine months ago. A C&H pattern is in play with base of cup at 1.4% and top of cup and handle at 1.9% which yields a target of 2.4%, key resistance above. Considering the gap above at 2.1%, the 2.00-2.05% level could very well serve as the base line for the C&H as well, which would target 2.6% and higher.  The green lines also show where an island reversal would occur. The drop under 2.05% ten months ago created an island below.  Thus, if the yield comes up to this 2.00-2.05% area and gaps up to 2.2% and higher, green line to green line, an island reversal would play out.  The yield could simply choose to meander higher and fill the gap at 2.1%.

Before stoking the higher yield talk too much, the lower yield side must be presented since that direction is more likely moving ahead. The red upward-sloping channel is of course bullish but yield is at the top rail right now susceptible to a spank down. The length of the channel is met with negative divergence across its bullish yield run. For January, yield has now created a new high, but all the indicators are negatively diverged (red lines) so a spank down in yield would be expected. Projection in the near term, days ahead, is a pull back from this 2% level, a move down to 1.9% perhaps 1.8%, to test these support levels.  It does not appear time for the C&H pattern to break out to the upside. Interestingly, a move down in yields would correspond to a move lower in equities. The current print on the yield is 1.965%. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.

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