TNX 10-Year Treasury Note Yield Weekly Chart; Fibonacci Retracements; H&S

On Thursday morning, 5/30/19, US Treasury yields are; 2-year 2.11%, 5-year 2.07%, 10-year 2.26%, 30-year 2.68%. The 2-10 spread is 15.2 bips. The 3-month-10-year spread remains inverted. The 2's-5's remain inverted at 4 basis points. You can see that the 10-year yield is at lows not seen since 2017.

The chart shows the 38%, 50% and 62% Fibonacci retracements for the big bond selloff period from July 2016 to October 2018. Yield expands higher during that 2-year+ period from sub 1.40% to over 3.20%. Traders and investors were dumping bonds and notes like madmen convinced that inflation was here to stay and the Federal Reserve has no choice but to keep raising rates. In December 2018, Chairman Powell bumped rates higher which is now viewed as a step too far.

Investors immediately searched for perceived safety in defensive stocks, high-dividend plays, staples, utilities, real estate, gold and Treasuries so the yields trail lower since last September/October for nearly three quarters.

The yield stuttered slightly at the first 38% Fib at 2.51% but the bond and note bulls prevail sending the note prices higher and yields lower. Yield then tests the 50% Fib at 2.29%. It looked like the 50% Fib would hold as support but yesterday the bond and note bulls came in again buying Treasuries sending yields lower rupturing the 50% Fib so the 62% Fib at 2.07% is now in play.

A head and shoulders (H&S) pattern top also is playing out. The brown lines show a neckline at 2.62% and head at 3.25% which is a 63 bip difference so the downside H&S target is 1.99% if the 2.62% level is lost and it was lost. Same idea with the orange H&S if you want to draw it at an angle. Both H&S's breakdown from the same place. Note how yields came up for the back kiss after the neckline and then failed lower again; that is textbook technical analysis behavior.

So the Fib retracements open the door to 2.07% and the H&S downside target is 2%-ish. This creates a landing zone in the 1.99% to 2.07% range in the future. This does not have to happen right away. Reference the prior posts about TNX (the 10-year yield) and the TBT and TLT ETF's for more information.

If yield collapses to 2.07% now, that will be in conjunction with a stock market crash. The more likely scenario is sideways choppiness for a month, then recovery in yields to at least back kiss the 50% Fib at 2.30%-ish and higher. Then a rollover as the year progresses so the 1.99%-2.07% may be more of a Q3 and Q4 thing.

If yields continue lower, it will verify that inflation is Godot which has been Keystone's mantra the last few years. Humorously, the largest inflationary expansion is the size of the wallets of the greedy crony capitalists that have destroyed America over the last five decades. 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.