Friday, June 13, 2014

TNX 10-Year Treasury Note Yield Daily Chart Textbook Bear Flag Pattern

The drama with the 10-year continues as the vast majority of Wall Street and Chicago expect higher rates moving forward. But that was also the thought at 3% plus to begin the year. The theatrics continue with no clear winner yet in the inflation versus deflation debate. The brown lines show the textbook bear flag pattern that played out. Using whole numbers for easier math, yield drops the first leg from 3% to 2.6% a loss of 40 basis points. The sideways consolidation path occurs with a slight upward bias, exactly as occurs for the bear flags, then the second leg down starts at 2.80%. This yields a downside target of 2.40%, bingo, yield tags 2.40% satisfying the pattern and immediately bounces.

The red lines show the neggie d spank down that was easily forecasted to begin the year. The green lines show the positive divergence recovery a couple weeks ago. The indicators are a mixed bag with stochastics overbot at a ceiling but the RSI and ROC may have a wee bit more upside juice. The TNX weekly chart is a mixed bag as well but Keystone continues to remain in the deflation and deflationary camp for the US economy and looks for lower yields as the year moves along. The camp is lonely since over 95% of traders are in the inflation camp on the other ridge all proclaiming higher rates are around the corner.

The 2.60% level is clearly an important support and resistance pivot point. The darker blue lines show a sideways range going forward bordered by support and the 20-day MA at 2.53%-2.55% on the lower side and the 2.65%-ish resistance level on the top side. Interestingly, the Fibonacci retracements (not shown on chart) of the move from 2.8% down to 2.4% yields the 32% Fib at 2.55%, 50% Fib at 2.60% and 62% Fib at 2.65% exactly matching the sideways range highlighted.

Projection is some sideways stumbling through 2.55%-2.65% with the winner identified by the move above or below this range. Watch the RSI 50% bull-bear level to see who wins. Treasury bulls win with yield under 2.55% (higher note and bond prices and lower yields-deflationary) while Treasury bears win with yield above 2.65% (lower note and bond prices and higher yields-inflationary). 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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