TNX 10-Year Treasury Note Yield Weekly and Daily Charts

The inflationists are waving flags today pronouncing the end of the multi-decade bond rally (up prices and down yields). Yield jumps to 2.21% at this writing (lower prices). The question to ponder is if the rise in yields reflects a more robust economy moving forward, or not. The move over the last few days is very much technical in nature. The move above 2.06% resistance lit the fuse for the algo's to kick-in and the 2.08% resistance launches a jump to 2.2%+. The weekly chart shows how these yields are not seen since April 2012. Note the juicy gap back then that needs filled, and it is now filled by the action over the last 24 hours.

Staying on the weekly to look at the longer term, the brown lines show the inverted H&S developing with head at 1.4% and neck line at 2.3%. A move up through 2.3% immediately places 3.2% on the table as the target for the pattern. As often is the case for patterns, the target levels coincide with previous S/R, in this case the 3.2% vital S/R from 2011.  The red upward-sloping channel does provide the inflationists with fuel for their upside yield arguments. Yield is now at the top rail of the channel, a logical place to pull back down or at the least, digest the upward spike by moving sideways. The indicators are negatively diverged on the weekly, sans RSI, so a pull back is needed but the RSI likely points towards some action around this 2.2-2.3% area for a few days or couple weeks. The ADX is above 20 for many months showing a strong downtrend in place but note the drop off in the ADX since last Fall. This hints that the strong downtrend has faded, however, the upward channel move is not verified as a strong uptrend, yet. Keystone continues to lean on the deflationary side moving forward and yields may remain flat using 2.3% as a ceiling for another couple years or more.

The daily chart shows the wild spike higher in yield, from 1.63% to 2.21% in 18 days, +36%! The move higher is 3.2 bips per day (3.2 basis points; 0.032% per day). This is a phenomenal move. The majority of folks have been looking for inflation ever since late 2009, for over three years, and are quick to say that the day has arrived. The daily chart is negatively diverged except for the MACD line and the RSI. The RSI poked into overbot territory and that small move higher is key indicating that another high in yield is likely coming after a pull back. This would target a test of the critical 2.3% level. The daily chart plays out a bull flag with first leg from 1.63% to 1.96% (33 bips), and then leg two from 1.86% to a 2.19% target, now achieved satisfying the pattern.

Higher yields hurt the utility, telecom and REIT sectors, interest-rate sensitive areas. There may be some worry developing as monthly mortgage payments climb higher. The jury is out on the spike higher in yields.  Projection is for a dance around this 2.1-2.3% area but the neckline of the inverted H&S at 2.3% should hold as resistance. Keystone continues to project a flat move in yields for months forward and the move above 2.3% may be a long ways away still yet. The housing recovery should stall and a global economic slowdown should develop. In addition, the 18-year cycle must be respected and stocks remain in a secular bear until 2018. This cycle should create a lid on yields for a few more years and then in the 2016-2018 area and beyond is when the inflation and hyperinflation should hit in full force. At least we will not have to wait long to find out if the 2.3% holds, or not. The answer will be provided over the next couple weeks. 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 7:49 AM:  Wild action today. The yield moved from 2.15% up to 2.23%, then fell on its sword down to 2.15% now back up to 2.18%. Keystone needs the Dramamine. Also may as well look for the heart pills as the day's action ramps up.