TNX 10-Year Treasury Weekly Chart; Overbot; Negative Divergence Developing; Yield Extended

The 10-year yield is the focus of attention as it explodes through 1.30% yesterday now at 1.28%. Yield is receiving a strong push higher, and so are global yields. On the prior TNX daily and weekly charts, the daily was in neggie d so a drop in yield was expected, and the weekly was also in neggie sans the MACD. So the expectation was a spankdown in yield for a couple-few days, then recovery back up again and at that time you have to see if the MACD goes neggie d on the weekly to identify the top in yield on the weekly basis. Sometimes it is like herding kittens.

So yield drops for a couple-few days, then recovers, but, as seen in the weekly chart above, the MACD remains long and strong. Not only that, but the RSI decided to receive some more fuel in its tank and it wants yield to print another high. The activity the last two days changed the picture. The red lines show the neggie d remaining in place that wants yield to move lower. The TNX daily chart also remains in neggie d so a move lower in yield is expected again on the daily basis.

Thus, using the neggie d on the daily and weekly charts as the guide, yield should head back down again for a couple-few days, then back up again for another high in yield. At this time, the RSI will likely go neggie d and the MACD may or may not go neggie d. Thus, the top on the weekly basis is now 2 to 4 weeks out so early to mid-March when the 10-year yield will top out on the weekly basis which then will begin a multi-week down move in yield (lower yields higher prices). After that move lower in yields, it will likely be a last low in yield, and say from summertime forward yields will likely move sideways to sideways higher.

Yields may reverse quick and the long and strong RSI and MACD may become moot real fast if the stock market begins dropping. Traders will be selling like crazy and then running into Treasuries with some of that money which will drive yields lower.

Interestingly, the narrative is that higher yields will sink the stock market. The talking heads fear a 1.50% yield on the 10-year believing that will create a stock market selloff. A selloff in stocks is not expected to occur due to a rise in yields as the pundits decree. They will be surprised.

Instead, a selloff in stocks is expected and notes and bonds will be bot sending yields lower not higher. The TNX daily wants another spankdown in yield so the 10-year may relax lower from this 1.30%-ish down to 1.20% say, into the end of the week or Monday (this would be in conjunction with stocks selling off). Then yield comes back up again next week to 1.30%-1.48% to top-out and then begin a multi-week decline. The move back up will likely remain below 1.40% and not tease into that gap.

That W pattern bottom has the lower blue line at 0.49% and the two upper lines are 0.95% and 0.90%. That is a difference of 46 and 41 bips, respectively. Thus, if the 0.95% is breached, 1.41% is targeted. If the 0.90% is breached, 1.31% is targeted; this was already achieved. Yield is in that 1.30%-1.40% target range for the W pattern. The dark blue lines highlight the gap from a year ago. The bottom dark blue line is the 1.40% resistance and the other is 1.48%; this is the gap. Considering the neggie d on the weekly chart, the 1.40% resistance will likely hold.  Again, once the stock market begins falling lower, yields will retreat and this whole exercise may be moot.

So for now, the forecast would be down to 1.20%-ish over next few days then back up to 1.28%-1.40% next week where it tops out and then yields move lower for multiple weeks. Again, for the third time, if stocks begin selling off, yield will likely start dropping immediately and keep going. Keystone still does not have a trade in this arena. We talked about TLT and TBT. So on the rise in yields, TLT moves lower and TBT higher. This will set up to reverse as previously explained. When the stock market drops, yields will likely drop during the flight to perceived safety, TLT will rally and TBT drop, so TLT is a buy say in a couple weeks unless you scale-in which could begin now. TBT would be played from the short side in a couple weeks or start scaling-in short now. Keystone will likely not play either ticker since there are lots of other trades ongoing. 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 7:02 AM EST: 10-year yield 1.2888%. S&P -2. VIX 21.52.

Note Added 8:19 AM EST: 10-year yield 1.3160%. US dollar 90.85. S&P -1. VIX 21.32.

Note Added Sunday, 2/21/21: The Treasury yields take off higher like a banshee.  The commitment of the move is surprising. Traders are ditching Treasuries and buying stocks into the bubble top. For the TNX 10-year yield above, the ROC sneaks out a tiny new high as well. The histogram remains neggie d and the stochastics and RSI are overbot. This is why you have to wait and make sure the MACD goes neggie d. It is like herding kittens, now the RSI and ROC have wandered away. The chart will reset with neggie d. Yield is approaching that gap at 1.40%-1.48%. Will it be spankded down before then, fill the gap, or gap up through the gap? There is likely one jog move needed to turn the RSI and ROC into neggie d (down-up) and then another jog to finally roll the MACD over. Thus, 2 to 4 weeks for the top in yield on the 10-year and that begins a multi-week down move. It will likely be a lot of sideways chop and the 1.40% resistance, before the gap may hold as the top in yield this week. Then down for multiple weeks perhaps seeking 1% again. Yields will top out anytime between now and mid-March and likely not to exceed 1.40%-ish. The stock market is expected to collapse at anytime and as it does there will be an immediate flight to safety and the yields would immediately drop rather than take a few more days or couple weeks to top out. Perhaps a Black Monday may occur?