TNX 10-Year Treasury Note Yield 2-Hour Chart Tight Sideways Channel Breakout or Breakdown Imminent

The TNX is dancing through a tight sideways channel and the breakout to the upside, or breakdown to the down side, will be of monumental importance. The super-tight black channel has 2.19% as resistance and 2.15% as support. The 10-year yield is currently printing in the middle at 2.17% and will have to make a decision one way or the other. The red channel is between 2.14% as support and 2.21% as resistance. The 200-day MA is at 2.13% so let's call the lower bound 2.13%.

Thus, bond bears win big if the 10-year yield moves up through 2.19% and then up through 2.21% (Treasury prices lower, yields higher). This is the inflationary outcome ahead with stocks rising and Treasury yields rising. The bond bulls win big if the yield falls through 2.15% and then falls through 2.13% (Treasury prices higher, yields lower). This is the deflationary outcome ahead with stocks and Treasury yields moving lower. Of course the Fed decision on raising rates, or not, will impact this projection.

The red lines show an expansion pattern in play with yield throwing up and over the top rail so a move to test the trend line at 2.12%-ish may be on tap. If the 2.12%-ish level fails, yield is likely headed sub 2%. The red dots show yield extended to the downside so the bond bears had fuel to drive yields higher.

The indicators are stumbling sideways not tipping their hand. The RSI is above 50 at 51 supporting the bond bear case with higher yields. The MACD cross, stochastics under 50 and ROC under the flat line are favoring the bond bulls and lower yields ahead. So if the RSI drops under 50%, yields will be dropping lower. If the RSI stays above 50% and stochastics move above 50%, yields will move higher.

The table is set with yield at 2.17%. The stock market should catch a stronger bid if yield moves up to 2.19% and if yields punch up and out of the sideways channels at 2.21%, yields will run higher and so will the stock market. If yield slips under 2.15%, the stock market is likely selling off and becoming weaker (as bonds become stronger; more bullish with yields lower). If yield drops under 2.13%, losing the 200-day MA and lower sideways channel trend line, a test of 2.12%-ish will occur quickly. The stock market will be selling off. If yield then loses the 2.12% level it will likely begin dropping in earnest and the stock market will probably be falling down the rabbit hole.

Watch for the initial breakout either above at 2.19% or below at 2.15% which is the first indication of the path ahead. Then the 2.21% confirms the upside breakout in yields and 2.13% confirms the breakdown in yields. RSI and stochastics, as discussed above, verify the direction. The 10-year yield is at 2.167% and realizes it must make a decision likely in sync with the Monthly Jobs Report on tap in the morning at 8:30 AM EST; 9/4/15. 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 Saturday, 9/5/15: The 10-year yield teased higher to 2.16% after the Monthly Jobs Report but then fell to test the critical 2.12% level described above and closes at 2.13%. This 2.12%-2.13% support level is very important and a major bounce or die decision will occur next week.