UST10Y 10-Year Treasury Note Yield Daily Chart; Cracks Forming in the Federal Reserve's Obscene One-Decade-Plus Keynesian Financial Experiment

Keystone pointed out the bottoming in yields a couple months ago based on the positive divergence (blue lines), oversold conditions, lower band violation and mean reversion higher required. As September began, the yield is below the 20 MA below the 50 MA below the 100 below the 200; this does not last long. The 10-year yield is at 1.73% right now.

Remember, when traders want Treasuries they are buying like madmen driving prices higher and yields lower. Conversely, when times are good and traders want to take more risk in stocks, money flows out of notes and bonds so Treasury prices fall driving yields higher.

Yield did not have to come back down to the lows but it came down near there earlier this month. Yield tapped on the lower band so the middle band was on tap and occurs. Interestingly, if you can relax your eyes and make sense of the spaghetti, you see the top band and the 100-day MA providing a gauntlet of resistance at 1.84%-1.85%. This also acts a a magnet so price may want to venture to this level and make a bounce or die decision, perhaps timed with the Fed rate decision next Wednesday.

The ADX shows that the trend lower in yields was strong as the year began. That is because traders and investors were panicking after the Q4 crash and seeking perceived safety. That trend lower in yields early in the year was not a strong trend lower until mid-summer and then again when the bottom fell out in August and early September. The ADX is down to 16 indicating that the move lower in yields is no longer a strong trend (a sign that yields are stabilizing and bottoming). Watch for a potential positive cross on the Aroon going forward.

The chart tells a bigger picture. As the Federal Reserve continues cooing and Dove Powell flies above the masses dropping money from the sky, Treasury yields are no longer going down. Powell is up all night tossin' and turnin', as Bobby Lewis would sing, worried that the Fed's obscene one-decade Keynesian financial experiment is failing. When confidence is lost in the central banks, all is lost.

Considering the universal dovishness from central bankers around the world, yields should be trending lower; they are not. Something is starting to go very wrong in central banker land and they do not have a lot of ammunition to fight the battle ahead. Such is the fate of crony capitalism.

The 10-year yield weekly chart is agreeable to higher yields going forward. The monthly chart shows the ongoing sideways path of the 10-year yield through 1.50%-3.00% since 2010 (one decade since quantitative easing began; QE 1). Isn't it interesting that the 3-decade-plus bond rally is nearing its end. With a recession and likely big drop in stocks on the come over the next couple years, yields will want to move lower as investors seek safety but in fact yields may simply bump sideways and then begin moving higher.

Yield has violated the lower band on the monthly chart so a move to 2.52%, and dropping, is on the table in the monthly time frame. It is conceivable that the 10-year will bounce around between 1.40% and 2.50% for the next couple years as the multi-year disinflationary and deflationary period runs its course.

Keystone has touted and shown how the US remains mired in disinflation and deflation for many years. It was always met with scoffs but not anymore. Keystone also said that there will come a time in the future when all the inflationists throw in the towel and give up, finally accepting disinflation and deflation as their destiny. When this occurs, that is when the yields will bottom and begin to rise and usher in the very long period of inflation ahead. This will then lead to an explosion into hyperinflation (think velocity of money) creating a whole new set of nightmare problems down the road in a couple-three years or so.
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 Morning, 10/26/19: The 10-year finishes the week 4 basis points higher to 1.80%.