TNX 10-Year Treasury Note Yield Weekly Chart Inverted H&S Patterns Sideways Channel H&S Gaps

The TNX weekly chart highlights the inverted head and shoulders that Keystone has highlighted ever since the back half of 2012. The thicker brown lines show a head at 1.40% and neck line at 2.30% which yields a target of 3.20%. A neckline at 2.10% is another option for an inverted H&S pattern which would target 2.80%, already achieved. Note that yield has never back kissed the 2.30% neck line breakout. Interestingly, the 2.10% neckline was back tested successfully which then launched yield higher with the big spike. This provides the 2.80% target more street cred. Yield should retreat to at least 2.30% to back test and show the neckline level respect. Interestingly, there are 2 juicy gaps below, one at 2.0% and the other at 1.90%, that will probably need filled moving forward.

The talk about yields over the last couple days is reminiscent of the August-September top in yields where 90% of the traders said the sky is the limit with yields. This is when Keystone highlighted the red rising wedge, overbot conditions and negative divergence which wanted a spank down in yield, which occurred.  As yield creeps higher, a matching or higher high at 3.00% is needed to lock in the negative divergence shown by the thin red lines for the indicators over the last 3 months. The MACD line is long and strong as the prior top occurred 3 months ago and wants to see the matching or higher high print again at 3.00%. Yield is moving through the sideways channel at 2.5%-2.8% for the last one-half year so the move out of this channel is important and the yield bulls are trying to push higher. The sideways channel can be extended to 2.5%-3.0% as the next month or two plays out.

The ADX shows a strong downward trend in place for 2011 into 2012 and sure enough the yield continued lower. In 2012, the ADX remains elevated indicating the strong downtrend remaining in place which leads to the low 1.40% print. ADX staggers sideways through 12-22 from mid 2012 to mid 2013 showing a sideways basing in yields. Then, as the inverted H&S breakout occurs, yields jump higher, and the ADX jumps higher confirming that the up in yields is a strong uptrend. ADX drifts back down to 29 right now showing the uptrend losing gas, however, the ADX can rise again to signal the move to 3% and higher, or continue lower to the low 20's showing that the uptrend oomph is history. Note that the last 6 months action displays an H&S pattern so the head at 2.90%-3.00% and neckline at 2.50% would target the 2.00%-2.10% area satisfying back kiss needs for the inverted H&S as well as filling the gaps. The 3.20% has to remain on the table for the coming weeks but at this juncture, the 2.80%-3.00% zone should hold as a top.  Projection is a move through 2.00%-3.00% for the coming months and perhaps a year or three. The monthly chart hints at a sideways move through 2.20%-3.20% for the months and perhaps years ahead. The 90% plus majority of traders will likely be surprised that for the foreseeable future yields do not climb wildly and excessively higher but instead motor along in a sideways funk. 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.