Thursday, September 5, 2013

TNX 10-Year Treasury Note Yield Daily Chart Rising Wedge Negative Divergence Yield Extension Above MA's

The 10-year yield hits 3% a short time ago not seen since the summer of 2011. The daily chart shows overbot stochastics, a red rising wedge and negative divergence across all indicators across the 2-month time frame. The bond bears, yield bulls, want to squeeze a bit more juice out, and the black dot shows the print that is already in concrete at 3%, but yield is expected to top out right now and drop, rather than catapult higher. The purple dots show the price extension in relation to the moving averages so a reversion to the mean is needed. The prior reversions were 20 basis points, then in July 30 basis points, and in August about 20 bips. So a pull back of 20 bips is reasonable so a drop from 3.00% to 2.80%.

A drop to 2.80% would create a failure of the lower trend line of the rising wedge which would usher in further weakness in yields (higher bond prices). The 20 MA is 2.78% and 50 is 2.66%, two important support levels. When the high print in yield printed for the purple dots, like now, the top took one day, in July three days, in August, say 4 days, so the yield should top within the next one to 4 days, so sometime between Friday and Wednesday. The weekly TNX chart is negatively diverged as well which is a very strong combo that says lower yields ahead. Keystone bot the TLT ETF today opening up a new long position. TLT moves higher when yields move lower (the TBT ETF moves higher when yields move higher). Traders are thinking either yields move higher and stocks move lower, or, yields move higher and stocks move higher. No one is thinking about the disinflationary and deflationary vibe that Keystone continues to leave on the table which is lower yields and lower equities moving forward. 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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