UST2Y 2-Year Treasury Note Yield Chart; Tight Bands Making Big Decision

The tight bands (pink arrows) drama continues for the 2-year Treasury note yield. This has been of interest since the standard deviation bands came in tight, and then in the last post as the sideways tunnel forms, and now as the bands begin flaring out declaring up as the direction ahead for yield but not so fast.

The same conflicting drama is ongoing. The tight bands want to squeeze-out a huge move but the formation does not predict direction. Yield is on a 5-week uptrend and the no-brainer is thinking that the tight band squeeze will shoot yield quickly towards 5%. This would be true if the chart indicators were all long and strong with more fuel in their tanks but they are not.

The red lines show that all the indicators are weak and bleak, out of gas, and having no fuel to move yields higher. The pop higher in the 2-year yield was on Friday's inflation data but this moment of glory may be short-lived.

Adding more drama is the RSI and stochastics that have near-term momentum that may help yields remain buoyant for a few days. It is important to check the chart tomorrow morning once the week begins since the new positions of the indicators for the new week of trading ahead will tell a lot.

If we take the tight bands out of the picture and pretend the standard deviation bands were like they were in August, drifting in a little but then out again, no biggie, the call would be for the yield to top out here and begin selling off for a multi-week down move targeting the middle band now at 4.39%.

The hotter inflation data is new info that chart will price in further so again, the posture of the chart tomorrow morning will tell a lot about the path ahead. Do not be surprised if a big reversal happens and yield falls like a stone.

You do not have to wait long. It is time to sh*t or get off the pot. If yield continues the ride higher on the upper band it will launch towards 5%. Since the chart is weak, however, the expectation is for yield to chop and top-out now and drop going forward for a few weeks targeting 4.39%.

Perhaps this occurs if the stock market collapses with a big selloff (which may occur since UTIL under 939 placing the stock market in a crash profile currently) and some of that money leaving stocks will find its way into Treasuries sending yields lower. Keystone looks around and no one is sitting on his side of the boat. Everyone is partying and having a good time on the higher yields forever forward side of the boat. 

Again, we will not have to wait long. The tight bands will make the final decision this week and if yield is to reverse hard and get squeezed lower, it has to happen now, otherwise, up in yields is the path ahead with 5% likely coming faster than anyone expects (tight bands create powerful moves). Comically, higher yields would spook the stock market as well. Also, utilities do not like higher yields since they have to fund their multi-billion projects over many years.

You will have to take a look at the chart tomorrow morning and see what the new clues are about the direction ahead. Prepare for drama. 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.