Wednesday, June 3, 2020
TNX US 10-Year Treasury Note Yield Daily Chart; Sideways Symmetrical Triangle; Tight Bands
The Treasury market is about to make a big move. The pink standard deviation bands are squeezing in tight and will shoot the 10-year yield strongly up or down. Tight bands only forecast that a big move is about to happen but does not predict direction. The 10-year yield, 20 and 50-day MA's are all at the same level at 0.68% (move the decimal one place over). The 10-year is currently printing at 0.70%.
The 20-day MA is crossing up through the 50-day MA which is an upward sign for yields ahead. The 200-day MA is up at 1.39% and it needs a back kiss at some point in time.
The sideways symmetrical triangle is in play. Yield has oscillated into a tighter and tighter range and now sits at the apex of the triangle having to make a decision up or down. The vertical side of the triangle runs from 0.50% to 1.00% or 50 basis points (bips). Thus, the triangle, and the tight bands, are about to squeeze out a big move of perhaps 50 bips which places the 10-year yield either at 1.20%-ish, or 0.20%, over the coming days. Perhaps we can entertain three outcomes.
First, since the broad stock market is set to roll over due to the extreme complacency and fearlessness, this risk-off environment would be expected to send yields lower. Stocks are sold off and some of that dough goes into Treasuries which drives the note and bond prices higher and yields lower.
Second, the broad stock market rally continues higher for a few more days into next week since the ECB plans on pumping stocks tomorrow and the Federal Reserve is on tap to pump next Wednesday. Isn't it a joke of a financial system? Don't worry; it's on its last legs anyway. So stocks would rally higher and money will be pulled from Treasuries to place into stocks sending note and bond prices lower and yields higher. This scenario would be associated with a good economic rebound and analysts will say that yields are going up for a good reason.
Third, is an interesting outcome. This is when stocks drop, as the complacency says is coming any hour any time, and yields rise. How could that be? If stocks are sold off, wouldn't that money go into notes and bonds driving yields lower not higher? Wouldn't investors be seeking (perceived) safety and buying Treasuries sending yields lower not higher? Well, yes, that is the first scenario. However, you are forgetting the end game. Perhaps we are at the end game? This is when confidence is lost in the Federal Reserve and other global central bankers and their Keynesian money-printing schemes. Once confidence and trust is lost in the central banks, it's over. The fiat money system implodes. Thus, for the third scenario, the end game, stocks sell off into oblivion but to everyone's surprise, yields rise. Global traders and investors will immediately realize that 'we aren't in Kansas anymore'. There you go. Three choices. Choose your poison. If this third outcome occurs, that tells you that the end game has begun and Uncle Sam begins walking towards the gallows, walking the green mile.
The fourth scenario of higher stocks and lower yields is ignored since that is the market for the last decade due to the central banker's largess. The Fed, BOJ, ECB, PBOC and over 20 other major central banks are printing money like madmen driving yields lower and stocks higher. The central banker easy money has pumped all asset classes higher to the point that no one truly knows what anything is worth anymore. The Fed and their sick friends have destroyed all price discovery in markets. The easy money has driven up stocks, bonds (higher prices lower yields), real estate, art, classic and antique cars, vineyards, collectibles, any asset class that you want to mention. It is sick and has an expiration date at some point forward.
The four horseman of the global financial Apocalypse, the Fed on the white horse, the PBOC on the red (commie) horse, the ECB on the black horse and the BOJ on the pale horse, are, as Ezekiel says, here to release sword, famine, wild beasts and plague on the world. 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 9:50 AM EST: The SPX pops 26 points to 3107 with the 10-year yield up to 0.74% so scenario two is occurring. Any minute, someone will say that yields moving higher are a good thing. Will scenario two slip into scenario three? Only time will tell.
Note Added 4:43 AM EST on Thursday Morning, 6/4/20: The SPX finishes the Wednesday session up a big 42 points, +1.4%, to 3123. The S&P 500 is up +2.6% this week. The 10-year yield rises to 0.76%. S&P futures are down -10 this morning with yields hanging steady at 0.75%-0.76%.
Note Added 6:50 AM EST on Friday Morning, 6/5/20: The SPX retreats 11 points to 3112 in the Thursday trade. The 10-year yield moves higher to 0.85%. Well, look at that. Stocks are heading down and yields are heading up. Are traders beginning to sniff-out the end game?