TNX Weekly and Daily Chart Negative Divergence Inverted H&S
The 10-year yield jumps yesterday to 2.72% and maintains this level this morning. Note the 2-month sideways channel range through 2.45%-2.75%. The red lines show a rising wedge in play with negative divergence for the indicators so a drop in yield would be expected moving forward. The thin blue lines show a potential ascending wedge which is bullish but the indicators do not reinforce an upside move. The weekly chart shows negative divergence although the MACD line has a bit more juice. Thus, a move across these current yield levels, 2.60%-2.75% may continue for a few days or week or two, but down is the direction forward overall. The weekly chart thick blue lines show an inverted H&S with head at 1.40%, and neck line at 2.07% that targets 2.74%, achieved. Thus, this inverted H&S pattern is fulfilled, however, the thin lines show two optional neck lines at 2.30% and 2.40% so this provides further upside targets at 3.20% and 3.40% in future months or years.
The thrust higher in yields was very strong and the ADX on the daily is above 30 for 3 months verifying the strength of the trend. The ADX is now leaking running out of gas. The 200-week MA is 2.55% so pay attention to this level as a pivot. The move higher never properly back kissed the key inverted H&S neck line levels so a move back to the 2.40%, 2.30% and/or 2.07% levels would be prudent. Projection is for lower yields for the weeks and months ahead. Adapting this to the tradeable ETF's, TBT and TLT, the TBT mimics the TNX charts above so it would be expected to trail lower moving forward while the TLT is expected to be basing and would be the long play forward (wait a few days for yield to place its top). 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.
KS, do falling yields and increased demand for treasurys still equate to falling equities, or has that relationship become inconsistent too?
ReplyDeleteLately it has been higher yields with higher stock prices. This hints that economic conditions may be improving causing yields to rise, or, simply that the tapering is expected to start and notes and bonds are less attractive. The asset relationships remain jumbled. It will be interesting in couple days as yields should top and roll over so as they start to move down the direction of the SPX will have to be studied. If yields go down, and stocks fall, the H&S patterns for the broad indexes would come into play as their necklines fail.
DeleteWatch out cause a rise to 1705-1707 is possible for today if 1700.62 is taken to the upside.
ReplyDeleteA good idea would be to watch market's behaviour at 1700.62 - does it break this level with high confidence ? Than close your shorts and forget about it for the moment. New highs will be in cards the next days if we see an impulsive move well above 1700.62 (level taken AN HELD AS SUPPORT). Watch out how you're handling your shorts. If you're fully hedged with longs, ok, you can wait until 1709-1710 to see what happens there (although this is a risky option).
Also, you have observed on 4h chart the Head and Shoulders (left sh - 1700.32 / head - 1709.60 / right shoulder=maybe under construction).
But on a smaller time frame (1H) there's under construction an Inverted H&S (left sh - 1684.36 / head - 1679.10 / right sh - maybe under construction/ to be defined).
So , the market is offering food also for bears and bulls?
What will be the outcome?
Only big banks know that! ;)
In case of Bullard's speech MAYBE it will be focused (among others) on inflation and it will be linked with tomorrow's data on CPI. So don't expect BIG ANSWERS today :). Understand the situation of today's speech in a larger context (PPI today, CPI tomorrow).
For today bulls want to see 1700.62 taken (and held as support after that!) and after that 1709.60 also taken the next days.
For today bears want to initiate a down move to 1672 or 1660 IF 1700.62 (R1) provides very good and strong R.
If 1700.62 is taken and held after that as support (S)... Bears beware!
ALSO: watch out if those barkin' b*****s want to play with market a little more... a bearish outcome would be to take 1700.62 and 0.5-1 point more and after that ...whoosh! to the bearish target (1660-1672) or only to 1680 (!) to kill both bears and bulls!
So watch out, more games might be in the house today!
Good luck all.
Personally I lean bullish here but I'm prepared to any trip to 1680 or lower. They will be bought! Don't expect Faber's 1987 story or Prechter's SPX 400 target! Those are stupid things!
GS guy
our targets are similar, on downside for today, SPX 1683 should do it for the bears. Above 1683 and the bulls will cruise and at least keep indexes sideways with upward buoyancy. As long as SOX and XLF hold up, bulls are okay, a failure with either of these and the downside begins again.
DeleteOf course KS our targets are somewhat similar!
DeleteThe charts are the same, the approach may be different , but the charts are the same!
I expect more traps today, all market players should be nimble and keep a good part of their capital in cash as the best hedging option!
GS guy
GS Guy. We are so gifted to have you here, helping us navigate the financial market turbulence in preparation for the set-up of major 4!
ReplyDelete:) it's my pleasure!
DeleteI have one idea: from that 10% for donations if you split the amount in 9% to my "help the poors" project and 1% (you can also think your own % ratio between my ' help the poors' project and KS 1% to 9% is not something necessary established) to KS because he is doing here on a daily basis A GREAT WORK - that would be a good idea!
KS also has some costs to maintain this site where we all can meet and some donations would help us all! Ok?
thank you !
GS guy
I think this is a great idea so that we can support KS in continuing this wonderful forum that benefits us all, let alone all the tireless hours of research and posting that he does here. I just need to get out from underwater on my two (better decisions will be made in the future) long term plays I have been holding for awhile. :)
DeleteC.
SOX failed your level , KS.
ReplyDelete