Friday, September 19, 2014

TNX 10-Year Treasury Note Yield Negative Divergence Developing

Similar to the USD dollar chart, the yield is moving higher with negative divergence (red lines) creating an initial pull back. Overnight, the yield has dropped from 2.64% down to 2.60% currently. The 200-day MA at 2.65% creates overhead resistance. The MACD line remains long and strong so yield will want to print another higher high before the MACD goes neggie d and the firm near-term top in yield occurs.

Keystone highlighted the TNX daily chart with the green falling wedge, oversold conditions and positive divergence (green lines) three weeks ago forecasting the up in yields, which occurs. The pink dots show how yield is extended to the downside with the moving average ribbon indicating that price is overextended to the downside requiring a mean reversion, which occurs. The 20-day MA is crossing above the 50-day MA which is bullish for yields (bearish for note and bond prices) but as often occurs with moving average crosses, they by nature lag, so yield is actually topping out in the near term.

Into early next week the expectation is that yield will come back up and attack the 2.65% resistance level which is both the 200-day MA and strong overhead horizontal resistance over the last few months. The yield should stall at 2.65%-2.67% and then trail lower for a few days or week or two. The TNX weekly chart continues to show some long and strong juice, like the weekly dollar chart, so after a near term pull back in yields, the yield should venture higher again in the weeks ahead. The 2.75%-2.80% resistance level is very important where the game would change and the 3% and higher yields will be on the way as the inflationists have projected for the last few years. The disinflationary and deflationary funk remains as long as the 10-year yield remains under the 2.65%-2.80% area. Yields may move higher to test the 2.75%-2.80% area into the end of the year but the current expectation is that the higher resistance levels will hold and then yield will resume the sideways to sideways lower path ahead for 2015.

The 50-week MA is also at 2.65% so in the very near term this is an important land in the sand. The expectation is that 2.65% will be tested early next week and hold with yields dropping back to 2.50%-2.55% but then for the weeks ahead more upside in yields should occur with the 2.65% level giving way to set up the test of the 2.75%-2.80% as the year moves towards an end. 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 5:02 PM:  TNX drops today to 2.59% but the MACD line remains long and strong so the anticipation remains that yield should move back up to test the 2.65% resistance so the MACD line can negatively diverge.

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