FVX 5-Year Treasury Note Yield Weekly Chart Rising Wedge or Ascending Triangle

Just as there is a fine line between love and hate, or victory and defeat, there is also a fine line between a rising wedge and ascending triangle. The red rising wedge pattern is bearish while the ascending triangle is bullish. Typically, a rising wedge will show an upper trend line that clearly slopes higher. For the 5-year yield chart above, the top trend lines are very near each other and flatter in nature. Starting with the bond and note bears (looking for lower Treasury prices and higher yields), the green ascending triangle would pave the way. The vertical side of the triangle is 70 basis points so a breakout from the 1.80% upper base line would target 2.50%.

For the bond and note bulls (looking for higher Treasury prices and lower yields; perhaps a flight to safety if a dramatic downturn occurs in the global economy and markets), the red rising wedge will pave the way lower as yield collapses from the rising wedge. The red lines show negative divergence across all indicators for the last one year. There is some near-term juice available in the few-month time frame. So yield can stumble along sideways for a while but would be expected to move sideways to sideways lower honoring the red rising wedge pattern. The chart will have to be monitored each week forward to see if the situation changes.

The ADX line shows a strong upward trend in yields during late 2013 and early 2014 (pink box) but the trend petered out into a sideways stumble currently. The yield is above the 20-day MA above the 50-day above the 200 so a mean reversion will be needed. The top thin neon blue line is at 1.877% and must be watched closely. Note that there is upside space remaining in the red rising wedge and the near term strength in the indicators can allow yield to play in the 1.80%-1.90% range for the next month. A decision must be made, however, over the coming days and weeks. Price is sneaking up and out of the ascending wedge and back kissing the 1.78%-1.80% breakout area which encourages those looking for higher yields.

The projection is for the 5-year to play around at these current levels, 1.75%-1.90% for the upcoming days and weeks, say a week or three, and the expectation is for the rising wedge to win out causing yield to move lower down to the 20-week MA at 1.66% for starters. The chart can be reassessed as time moves along and the ascending triangle must be watched and shown respect over the next month. 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 9:45 AM:  The 5-year Treasury yield spikes this morning to a HOD at 1.80% and is now printing at 1.786%.

Note Added 10:18 AM on Saturday, 9/27/14: The 5-year is at 1.802%. Yields move higher as bond king Bill Gross leaves PIMCO, the  company he founded, and joins Janus.

Note Added 6:40 AM on Tuesday, 9/30/14: The 5-year is at 1.79% up from a 1.76% print overnight.