TNX US Treasury 10-Year Yield Weekly Chart; Textbook Two-Leg Bull Flag Pattern; Sideways Symmetrical Triangle; Tight Bands

The 10-year yield will receive extra attention this week after bond king Jeff Gundlach warns about the excessive shorts in Treasuries at record levels. This may create a massive short squeeze that will burn those shorts.

The chart is showing yield. Higher bond prices lead to lower yields and lower bond prices lead to higher yields. The record amount of shorts in the 10-year note is expecting lower bond prices and higher yields. The Wall Street pundits have been calling for higher yields and higher inflation since late 2009 and have been wrong for nine years. But they are positive that this time yields will sky rocket higher. Gundlach warns that the opposite may happen where the 10-year note prices rise sending the yield lower and as the shorts panic, yield will be driven strongly lower.

The green lines show the textbook two-leg bull flag pattern since 2016. Yield runs from 1.40% to 2.50%, keeping the math simple that is a 1.1% gain, or 1,100 basis points. During most of 2017, the move up in yield consolidates with textbook behavior a sideways to sideways lower bias forming the flag (lower lows and lower highs in yield). Then the second leg of the bull flag begins from 2.00%-ish so you know that this will target 3.10% if the note selling continues. And it does and yield runs to 3.10% satisfying the bull flag pattern.

The blue sideways triangle is in play and yield is slipping below the lower trend line as this is typed at 2.85%. The vertical side of the triangle is about 32 basis points. Thus, a breakdown from 2.85% would target 2.53%. That would get everyone's attention as Gundlach warns.

A breakout in yield above the uppoer trend line at 2.98%-ish would target 3.30% with the inflationists and proponents of higher yields finally claiming victory after many years of predicting higher yields.

The red lines show the neggie d spankdwon in yield that Keystone previously highlighted and predicted which occurred. Note the tight pink standard deviation lines. Holy Moses. The move in yield is going to be bigtime. Tight bands do not predict direction but do predict that a huge move is on tap.

If yield continues lower from 2.85% and loses the lower band at 2.79%, the 2.53% target is likely. Bond and note bears (that want lower Treasury prices and higher yields) need yield to return inside the triangle at 2.85% to 2.98% and then to breakout higher to target the 3.30%.

The bond bulls (higher Treasury prices and lower yields) have to be given the advantage since yield is on the verge of breaking down from the triangle right now at 2.85%. 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 at 5:36 PM EST: The 10-year yield drops to 2.82%.