Thursday, June 20, 2013

TNX 10-Year Treasury Note Yield Weekly and Daily Charts Long-Term Inverted H&S Pattern

One of the big stories is the up in yields. The 10-year yield touches 2.44% a short time ago now hovering around the red dots at 2.42%. The daily chart shows the yield tagging the upper trend line for the channel with the current print. The indicators are negatively diverged across the board with RSI and stochastics continuing to work off overbot levels. There is some near-term momo ongoing after the Fed said it may moderate QE this year and end it by the middle of next year. This triggers the selling of bonds and up in yields. The daily chart, however, hints that these price levels may be short-lived and the negative divergence will spank the yield lower.

The weekly chart shows how the yield this morning are testing levels not seen since March 2012, fifteen months ago. The blue lines show the massive long-term inverted H&S that has serious ramifications for markets. Yield is at the neckline now. A break much higher will pave the way to the 3.20% target for the H&S. This 2.30-2.60% range is a no-man's land for yield where the break to the upside for the inverted H&S remains sketchy while at the same time a collapse lower from this resistance zone is in question as well. The red rising wedge ends in this zone as well. The stochastics on the weekly chart are overbot and negatively diverged so they want to see yield drop. The other indicators are floating higher which signals that higher highs in yield are desired after a pull back may occur. This reinforces the 2.30-2.60% zone as a battleground moving forward. The RSI on the weekly is not yet overbot so there is room for yield to move higher.

The projection is for yield to play around between 2.10% and 2.60% for the next month and then roll back over to the downside placing the inverted H&S on hold for a while. Of course this path can change quickly if yield keeps ratcheting higher. If yield fills the 2.50-2.60% gap and punches up through 2.58% the door is then firmly open to 3.20%. The current thinking is that the 2.10%-2.60% resistance area will hold over the next month and yields will travel back down. 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.

Note Added 2:40 PM:  The 10-year yield tops at 2.47% so far today, now at 2.42%.

1 comment:

  1. I think you are using the wrong neckline for the H&S formation. Should be a downsloping neckline from the first shoulder to the second. Using the measurement from that gives us a target of 2.9%.

    I'm thinking a final high of 3.5% which is the upside resistance from the downsloping trendline going back to 1986.

    Then yet another decline to 1% or less.

    One can argue that today's charts call for the final bottom of the bear market in yields but the economy does not support that argument. You cannot have rising yields in an overtly deflationary environment, at least not for long.



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