Saturday, January 31, 2015

TYX 30-Year Treasury Bond Yield Daily Chart Oversold Falling Wedge Positive Divergence

The 30-year bond yield prints a new record low on Friday at 2.226%. Global markets and world economics are printing history each day and you get to witness it in real-time. The falling note and bond yields around the world create the whiff of deflation in the air. The bond orgy (traders and the Fed chasing notes and bonds so prices are up and yields down) should take a temporary pause since the chart displays the green falling wedge pattern (bullish for yields), oversold conditions and universal positive divergence across all indicators (green lines). Note the bounce in yield two weeks ago due to possie d but the MACD line and ROC (red lines) were weak and bleak wanting to see another lower low in yield which is now received resulting in universal possie d and a launch for yield on tap.

The pink dots show yield extended below the moving averages so a mean reversion (higher yields) is desperately needed. Since yields are in for a short term bounce, money will be leaving Treasuries and some of that dough will find its way into stocks and likely fuel a temporary recovery rally in equities.

The TYX weekly chart remains nasty. Stochastics and RSI are oversold but the indicators are weak and bleak trending lower so after this shorter term bounce due to the possie d on the daily chart yield will likely leak lower again and come back down for another look at the low yield (to satisfy the weakness on the weekly chart). So a more substantive and sturdy bottom may occur for yields say in mid-February through March.

Concerning ETF's, TBT is the same basic chart as above with the same technical analysis and TLT is the inverse ETF exhibiting a rising wedge, overbot conditions and negative divergence desiring a spank down. Keystone does not have any trades on in Treasuries but over the coming days say into early February you would think about being long TBT which should receive a quick and strong bounce and short TLT that will be moving inversely dropping quickly. The move will be short-lived so it is only for nimble traders. Yields will find a firmer footing during February into March and then likely stagger sideways through the year with a very slight upward bias. 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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