Sunday, February 8, 2015

TNX 10-Year Treasury Note Yield Daily Chart

Keystone posted the 10-year yield chart a few days ago calling out the falling wedge pattern, oversold conditions and positive divergence which predicted the launch in yields which occurs. Yield also tagged the lower standard deviation band (pink) so a move back to the middle band occurs and now price is a hair away from tagging the upper band at 1.97%.

Positive divergence was forming for TNX and in place mid-January to create a launch move which occurs, however, the red lines show the MACD and ROC indicators wanting another low in yield, and sure enough, the spike up in late January fades and lower yields are printed as February begins. The indicators are then universally positively diverged setting up the possie d launch, which occurs. The indicators remain long and strong so higher yields will be printed after any one or two-day pull back occurs, if it occurs considering the strong thrust higher. The indicators are showing no signs of negative divergence as yet so the yields have oomph higher. The weekly chart is agreeable to a stabilization of rates going forward.

Yield stalls at the high from one month ago but it should push up through there with the long and strong oomph. Also, yield is so close to the upper standard deviation band it should touch it at 1.97% and dropping. The top rail of the downward-sloping channel is at 1.95% so there is a confluence of support/resistance at the 1.94%-1.97% area. The 50-day MA is 2.03% and strong resistance is at 2.05% (brown line). So in the short term the Treasury bears should have their way (lower prices higher yields) but price may stall initially at this 1.94%-1.97% area, but then move up to 2.00%-2.05% but only in conjunction with the upper pink standard deviation line moving higher. If yield substantially pokes up through the upper band, now at 1.97%, then yield will likely retrace to the middle band at 1.82%. So watch that upper standard deviation line closely.

Keystone calls for sideways Treasuries and currencies this year so a move of the 10-year yield through 1.70%-2.05% would not be surprising through most of this year. This range can be broadened out through 1.60%-2.30% depending on how things proceed. The general idea will be that both bond bulls and bears will be slapped around. As yields move higher, the inflation talk will increase and analysts will proclaim that the top is in for the bond market (highest price lowest yield). It happens every time over the last few years. But the bond bears will probably become frustrated as yield stalls as described above at the 2%-ish area and then leaks lower again. The deflationists will be frustrated that yields are not dropping under 1.80% and the inflationists will be frustrated that yields stall and begin staggering sideways through the year instead of breaking out strongly above 2%. If yield breaks up through 2.05%, the inflationist argument will gain credibility since yield will then want to travel up to 2.35%. The expectation is a flat move for yields as the year plays out. 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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