TNX 10-Year Treasury Note Yield Weekly Chart Downward-Sloping Channel H&S Pattern

The 10-year yield is a major focus of traders nowadays. The Wall Street consensus, over 95% and more, except for Keystone, predicted yields far above 3% by now if not 4%. Inflation remains on a milk carton as the bond market says the economy may not be as rosy as thought. The Cup and Handle (C&H) pattern from 2012-2013 targets 2.7%-2.8% which was achieved. As yields climbed in 2013, nearly everyone was convinced that inflation was here and it was time to strap yourself in for a wild ride. The ADX moved above 25 showing that the trend upwards in yields was strong. It did truly look like break-out time until Keystone poured cold water on the move at the first top in 2013 due to neggie d on the RSI, stocastics and histogram, and then the top at 3% to begin the year when the warning was for a big down in yields due to the universal neggie d (red lines), which occurred.

Price staggers sideways this year with a downward bias. The 2.45% level was key support for over one year but it ruptured three weeks ago. The purple lines show an Head and Shoulders (H&S) pattern in play now with neck line at 2.45% and head at the 3% top. This is a 55 basis point difference that now targets 1.90% since the 2.45% neck line failed. A back kiss of the neck line is expected and may be in progress now with yield moving up to 2.42% a short time ago. The 200-week MA is 2.39% so pay attention to this level.

The daily chart for TNX is very agreeable to the current upward buoyancy in yields, however, note the weak and bleak RSI and MACD line in the weekly chart above. The histogram, stochastics and ADX are positively diverged with the drop in yield and help create this current bounce action for yield but the RSI and MACD are going to want lower yields going forward. The horizontal support and lower rail of the channel coincide at 2.20%-2.30% which serves as a downside target over the next month or so. Meanwhile, watch for the back test at 2.45% where yield will either bounce, or die. Failure will truly lock in the lower 1.90% target going forward. The RSI is not at oversold levels so there would be plenty of room available for lower yields in the months ahead.

The pink ADX box shows how the up in yields was the real deal in 2013 and the trend was strong (above 25), however, that fell apart to begin this year. Watch the ADX mid-20's level since that would indicate that the trend lower in yields is very strong and the lower 1.90% target becomes even more doable. If the ADX does not want to move higher the down in yields is not a strong trend and yields will once again begin the trek higher to 3%.

For now, yield should back kiss the 2.45% for a bounce or die decision. If a bounce occurs yield would be expected to stall before 2.50%, and move lower towards the 2.20%-ish support level, placing a lower low in yield than the 2.30% bottom prints as the weeks move forward. The two 2.30% long lower candlestick shadows from 2 and 3 weeks ago create a Tweezer bottom and hinted that a recovery move higher in yields was needed. 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 7:25 PM: TNX came up for a high at 2.44% back kissing the neck line of the H&S discussed above and closed at 2.43%. The 20-day MA is 2.45% so price may want to touch and test this level perhaps overnight.