Tuesday, July 8, 2014

TNX 10-Year Treasury Note Yield Daily Chart Sideways Channels

The 10-year yield creates drama these days but only continues to stumble sideways after it is all said and done. The top in yields to begin the year was identified at the time with the negative divergence (red lines) and overbot conditions. The bottom in yields occurs at the intraday 2.40% low yield with the positive divergence (green lines) and oversold conditions. The indicators are a mixed bag now with yield most content on staggering sideways like a drunk in Times Square on New Years Eve.The ADX is in the basement at 13 confirming that there is no trend in the yield action currently. Yield is simply moving sideways unable to commit to either direction.

The S/R levels (brown lines) at 3.03%, 2.95%, 2.80%, 2.65%, 2.50% and 2.40% can serve as signals of whether the inflationists (higher rates) or deflationists (lower rates) are winning the game. Yield dropped under 2.60% this morning about three hours ago. This shows yield treating the 20-day MA at 2.60% with respect testing this critical support level. Yield will bounce or die from 2.60%. A failure will likely send yield down to 2.50% for a support test. A bounce higher off the 2.60% support will send yield up to the 2.65% resistance level for a test. 

Note how two days ago price spiked intraday to test the 200-day MA at 2.695% but could not break up through, and also closed under the critical 2.65% resistance; a bearish indication for yield. The 20 MA crosses above the 50 MA so this forecasts higher rates ahead so keep an eye on this parameter. Of great importance is the rolling over and negative slope appearing for the 150-day MA. Both the 150 and 200-day MA's rolling over and now sloping down forecasts lower yields as the months move forward. The inflationists will be pulling their hair out since everyone, including the shoe shine boy and taxi cab driver, say higher rates are imminent. Perhaps rates will never go up until everyone gives up on the inflation story which may take a year or three.

To add to the drama, watch the 150 and 200-day MA cross. In May the 150 stabs down through the 200 a bearish signal for yields but in June the 150 crosses back above the 200 which forecasts higher yields ahead favoring inflation. So pay attention to this cross since if the 150 stays above the 200, both moving averages will eventually curl higher and the inflationists will parade through the streets since higher yields will finally be on the way. If, however, the 150 and 200 continue sloping lower, and the 150 stabs back down through the 200, yields are going to head lower and remain low for the considerable future. In the very near term, watch the 20 MA pivot off of 2.60% as described above.

Keystone remains in the disinflation and deflationary camp even though there are signs of inflation developing. Keystone agrees with Fed Chair Yellen's dismissive attitude with inflation. The food inflation should relax downwards moving forward and wages remain stagnant. Technology continues to take jobs from humans. The technicals described above over the next month or two will identify if inflation is here to stay, or not. The 10-year yield is currently printing at 2.597% as the fight for the 20-day MA continues. Bounce, or die. 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 9:26 AM:  The 10-year yield is 2.581% so the die scenario is currently winning with yield now two basis points under 2.60%.

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