TNX 10-Year Treasury Note Yield Weekly Chart Sideways Symmetrical Triangle

The markets are writing an epic story now and into 2016. After nearly seven years of obscene Keynesian money printing, the Federal Reserve's grand experiment, initiated by former Fed Chairman Bernanke and continued by Fed Chair Yellen, will emerge as a success or a devastating failure. The chart above hints at a date-certain when the historic market story's final chapter will be written.

If you extend the sideways symmetrical triangle out the apex occurs around April 2016 five months away. So a huge global economic decision is coming say as the new year begins. Those that worship at the Federal Reserve's feet and believe in a stronger economy ahead and higher inflation will be rewarded if yields break above 2.30% and heading higher. The vertical side of the triangle is 80 basis points so the upside target would be 3.10%.

If the Federal Reserve's grand experiment is exposed as a seven-year failure and the global economy falls into a complete deflationary collapse, which would likely rhyme with the Great Depression, the yield will collapse from the triangle at 2.05%-ish so the downside target would be 1.25%.

The pink boxes show that the upside move in yields in 2013 was a strong trend but it petered out as 2014 began. The downside move in yields was a strong trend as 2014 ended but that trend petered out earlier this year. The ADX remains very low verifying that there is no trend occurring with the 10-year yield now only sideways behavior. Ditto the moving averages that are lining out sideways. Yield is setting up for the epic move that will occur between now and springtime.

Getting out in the weeds for some of you more advanced technical traders, many times a sideways triangle pattern will initially breakout or breakdown, about one-half to two-thirds of the way through the pattern (like where the above chart is), however, this move is typically a fake-out and the yield will return into the triangle pattern and then commit to the other side. Thus, as the central bankers play their reindeer games, the 10-year may poke above 2.30%, 2.40%, 2.50% but remain skeptical. Above 2.50% and the bond bears (lower prices higher yields) are likely correct and the move is the right move higher and yields will move on to higher highs. But if yields roll over, and then reenter the triangle, they will likely begin dropping like a stone falling through the triangle and out the bottom side and destined for a one-handle.

There will be lots of drama ahead over the next few months. Considering the deflationary collapse in commodities, China and other economies slowing, weak copper, the sick Baltic Dry Index, and other factors, Keystone currently  favors the deflationary outcome ahead. The 18-year stock market cycle is the most reliable cycle and the secular bear ends 2018 followed by a secular bull 2018-2036. It is common to see big cyclical stock market rallies in a secular bear. Thus, with only about three years remaining in the stock cycle, it would not be surprising to see the stock market print  say 2 or 3 losing years over the next 4 years. A sick stock market would be in concert with the deflationary outcome for the 10-year yield chart above with a one-handle on the way. We will not have to wait long; the final chapter is currently being written for bond and stock markets from now into February-April. 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.