UST2Y 2-Year Yield and UST10Y 10-Year Yield Daily Charts; Falling Wedges; Positive Divergence

Here are the 2-year and 10-year yield charts on the daily basis displaying more wild stuff. It's a Wild, Wild Life. Over the last week, starting at 9/16/24 thru 9/18/24, the 2-year yield is moving lower and the 10-year yield is moving higher. The yield curve (2-10 spread) dis-inverts over the last week and normalizes to 23 bips today.

Tonight, in the late afternoon, the 2-year yield is 3.55% (chart is 3.56%) and 10-year yield is 3.78% (chart is 3.79%) for a normalized 2-10 spread (yield curve) of 23 bips.

The 2-day FOMC meeting started on 9/17/24 and the rate decision, where Pope Powell brought the tablets down from On High, and cut by a jumbo 50-bips was 9/18/24. The crowd goes wild. Stocks jump to the moon rewarding America's wealthy class that own the stock market.

The 2-year yield drops as would be expected since the Fed is now on an easing path. The conjecture forward is if each meeting will be a 25-bip or 50-bip cut from here. The Fed meets two days after the November 5th presidential election when the modern-day Herbert Hoover will be selected. The 10-year yield moves higher. Thus, the short end notes are bot sending yield lower and the longer duration notes and bonds are sold sending yields higher. Perhaps traders and investors are concerned about the government debt and deficits after all?

The two charts are interesting because the 2's are about to follow the 10's up in yield. Say what? Sonny, the Fed is on an easing path going forward; the 2-year yield has nowhere to go but down. What are you smoking? The charts do not lie and the 2-year yield is on the launch pad ready to run higher not lower on the daily basis.

On the UST10Y daily chart, the 10's, they drop into the blue falling wedge a bullish pattern (upside expected). It is tricky discussing note and bond charts versus stock charts since price up means yields down and visa versa for Treasuries. Keystone is not using red and green lines instead blue lines are used to not confuse the subject. The charts show yield so as the chart drops lower and lower, like the last few months, that means both the 2's and 10's were being bot by the fistfuls. Again, that makes sense since everyone was expecting the Fed to cut and trying to front run the decision looking for lower yields. So when the yield charts are moving down that is notes and bonds being bot and when the yield charts move higher that is notes and bonds selling off.

There was a tight band squeeze as September starts (purple arrows) which sends yields lower. Tight bands tell you a big move is at hand but do not predict direction; it was obviously down. You can clearly see the positive divergence across all chart indicators (blue lines) so the bottom was in for the 10-year yield and voila, it receives the possie d rocket launch off the bottom. The indicators remain long and strong so higher yields are expected going forward on the daily basis.

The upper band is in play at 3.89%. Staying with the 10-year, the ADX pink boxes show that the long drop in yields was only a strong trend lower for August and a little bit of time this month. The drop in 10-year yield is no longer a strong trend lower.

Note the Aroon on the 10-year yield when it was at the bottom. The red line was at maximum 100% and green line at 0% minimum. This says that 100% of the bond bulls expect yields to drop forever and never go up again. It also says that the bond bears, that would like to see rising yields, are 100% convinced that yields will drop forever and never go up again. That's funny and the sign of a turn which occurs. The Aroon is a contrarian indicator. Obviously, if 100% of traders in Chicago and New York expect yields to go up forever, that ain't gonna happen. This fractal should play out the same for the 2-year yield and you know what will happen ahead of time.

On the 2-year yield chart, UST2Y, it is the same-o story only it will lag the 10-year yield move higher. Yield continues lower but all the chart indicators are sloping higher, positive divergence. The downside in yield is done in the daily time frame and the 2-year yield is loaded-up with rocket fuel and on the launch pad. Someone needs to light the fuse and the 2-year yield will begin running higher like the 10's.

It sounds odd since the Fed is now in a cutting cycle but it is what it is. The charts price-in everything known up to the minute so whatever is going on says the 2-year yield will move higher in the days ahead not lower. The Aroon for the 2-year is set up as described for the 10-year yield so that fractal should repeat for the 2's.

The ADX for the 2-year yield chart says the down move in yield is a strong trend since July and continues. Note, however, that as yield slipped lower over the last couple weeks, the ADX has come off the top, so the strong trend lower in yield may have peaked two weeks ago. The ADX is a lagging indicator so as the yield pops due to the possie d, and runs higher, the ADX line will drop out of the pink box at that 26 to 30 level verifying that the strong trend lower in 2-year yields is officially toast probably in October.

Chairman Powell said inflation continues lower which are haunting words that echo in Keystone's mind; mainly because it is hollow in there. Although Powell's fancy data and metrics may verify his opinion and direction, inflation is actually moving sideways. It is in a neutral area between inflation and disinflation bumping along sideways. What does it mean if Powell did the 50-bip cut, basing it partially on the idea that inflation was continuing lower, when in actuality, inflation may be flatlining? Keystone does not know, what are you asking him for? He's just a down and dirty stock trader. Ask a bond guru.

Thus, going forward, the 2-year yield will begin popping anytime forward and move higher (notes sold off sending yields higher) and the 10-year yield will continue higher both on the daily basis. Are you ready for this to happen when the universal consensus has to be for the 2-year yield to drop going forward, not pop?

Everybody and his brother, and the Uber driver, shoeshine boy and doorman, say the 2-year yield is going to drop now that we are in an easing cycle. They asked Keystone why he has the nerve to make the call that the 2-year yield will move higher? He replies, "Possie d, possie d." Keystone is used to sitting by himself on the one side of the boat while the party is on the other side a Million Miles Away. Eventually they come over to Keystone's side.

Watch for the move higher in 2-year yields on the daily basis which will surprise everyone. Keystone is not playing any Treasury tickers or derivatives currently long or short. 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 Thursday Morning, 9/26/24, at 4:56 AM EST: The US yields are; 2-year 3.56%, 5-year 3.53%, 10-year 3.78% and 30-year 4.13%. The yield curve (2-10 spread) is 22 bips.

Note Added Thursday Afternoon, 9/26/24, at 5:00 PM EST: The 2-year yield is 3.63% and 10-year yield is 3.80% for a 2-10 spread at 17 bips. The 2-year is receiving the possie d rocket launch thrusting higher from 3.54% to 3.64% The 20-day MA is 3.67% very close so yield will want to kiss and test this resistance.

Note Added Saturday, 9/28/24: The 2-year yield finishes the week dropping to 3.57% and 10-year yield is 3.75% for a 2-10 spread at 18 bips. The Inflation and sentiment data and more Fed speak sends the rates to and fro. The 10-year likely wants to back kiss the 20-day MA at 3.73% to make sure its upward path is verified. The 2-year pops during the week exactly testing the 20-day MA resistance at 3.65% and is promptly spanked down on its first try. The 2-hour yield chart remains in possie d and the yield is on the launch pad ready to jump higher. Going up through the 20 at 3.63%-3.65% will be a big deal and signal more upside ahead for the 2-year yield. Everybody and his brother expects the 2-year yield to drop since the Fed's easing path is ongoing and there was a move to another 50-bip cut late last week for the FOMC meeting two days after the 11/5/24 election, so bloop, the 2-year yield retreats again. The US dollar is ready to launch higher in the daily time frame along with the 2-year yield. Traders are asking what is Keystone smoking? 

Note Added Monday Evening, 9/30/24, at 5:58 PM EST: 2-year yield 3.65%. 10-year yield 3.79%. 2-10 spread 14 bips.

Note Added Tuesday Evening, 10/1/24, at 5:43 PM EST: 2-year yield 3.62%. 10-year yield 3.74%. 2-10 spread 12 bips. The US dock workers go on strike and Iran is firing missiles at Israel.

Note Added Wednesday Evening, 10/2/24, at 3:43 PM EST: 2-year yield 3.64%. 10-year yield 3.79%. 2-10 spread 15 bips. 

Note Added Thursday Morning, 10/3/24, at 4:30 AM EST: 2-year yield 3.65%. 10-year yield 3.80%. 2-10 spread 15 bips. The 2-year yield continues nibbling at the 20-day MA overhead resistance at 3.66%. The high yesterday was 3.666%. The possie d strength should push her up through.

Note Added Thursday Morning, 10/3/24, at 5:48 AM EST: 2-year yield 3.66%. 10-year yield 3.81%. 2-10 spread 15 bips. The 2-year yield tests the 20-day MA overhead resistance at 3.66% so it is time to bounce or die.

Note Added Thursday Morning, 10/3/24, at 9:25 AM EST: Bounce. 2-year yield 3.67%. 10-year yield 3.82%. 2-10 spread 15 bips. The 2-year yield pokes above the 20-day MA at 3.66%.

Note Added Friday Morning, 10/4/24, at 3:20 AM EST: Bounce. 2-year yield 3.70%. 10-year yield 3.84%. 2-10 spread 14 bips. The 20-day MA at 3.66% becomes support.

Note Added Friday Morning, 10/4/24, at 6:07 AM EST: 2-year yield 3.71%. 10-year yield 3.85%. 2-10 spread 14 bips. Let's take a look at how the possie d rocket launch is going. On the $UST2Y daily chart, the chart indicators are long and strong (sloping upwards) forecasting more new highs in the 2-year yield going forward in the daily time frame. The RSI and stochastics cross above 50% into bull territory for the yield (do not get confused; the chart is yield so when yield moves up notes and bonds are getting sold off with prices dropping). The 50-day MA resistance is at 3.87% and dropping. There is solid yield resistance at 3.88% from the action in August. The expectation is for the 2-year yield to move up into the 3.85%-3.90% area over the coming days or couple weeks. Of course, the pending Jobs Report, that drops in a couple hours, inflation data and Fed speak will move rates to and fro. Analysts are caught flat-footed since everybody and his bro, and the chef and nanny, were 100% convinced that the yield would drop. All they had to do was look at the charts.

Note Added Friday Morning, 10/4/24, at 7:11 AM EST: 2-year yield 3.72%. 10-year yield 3.86%. 2-10 spread 14 bips. 

Note Added Friday Morning, 10/4/24, at 8:13 AM EST: 2-year yield 3.73%. 10-year yield 3.87%. 2-10 spread 14 bips. The US Monthly Jobs Report is imminent.

Note Added Friday Morning, 10/4/24, at 8:31 AM EST: 2-year yield 3.88%. 10-year yield 3.97%. 2-10 spread 9 bips. Holy smokes. Jobs are a 254K blowout to the upside with the unemployment rate at 4.1%. The 2-year tags the 50-day MA resistance at 3.87% in a heartbeat; no need to wait a couple days or couple weeks, it occurs in a couple hours.

Note Added Friday Morning, 10/4/24, at 8:36 AM EST: 2-year yield 3.87%. 10-year yield 3.95%. 2-10 spread 8 bips. Traders think the 50-bip cut in November is off the table. Stocks rally despite the lower chance of a November jumbo 50-bip cut. Wall Street is drinking the 'soft landing' tea kicking off a Friday stock market orgy. The 2-year yield has ran about 30-bips higher this week with the 10-year up about 20-bips. Inflation was kicked out the back door but it never left. Now inflation is in the bushes next to the house peeking through the window trying to climb back in.

Note Added Friday, 10/4/24, at 12:55 PM EST: 2-year yield 3.91%. 10-year yield 3.97%. 2-10 spread 6 bips. The 10's are bumping up against 4%. The pop in the 2-year yield is massive; now you know why Keystone calls the positive divergence set-up the 'possie d rocket launch'. Calling tops and bottoms is standard fare for a speculator.

Note Added Monday, 10/7/24, at 4:40 AM EST: 2-year yield 3.98%. 10-year yield 4.00%. 2-10 spread 2 bips. The 10-year is above 4% for first time in a couple months.

Note Added Monday, 10/7/24, at 5:08 AM EST: 2-year yield 3.99%. 10-year yield 4.01%. 2-10 spread 2 bips. Now you know how to call tops and bottoms in the markets using divergences. The bottom, or top, is not in until ALL the chart indicators (RSI, MACD, histogram, stochastics and money flow) diverge away from price, or in the case above, yield, in that time frame you are trading.

Note Added Monday, 10/7/24, at 6:50 AM EST: 2-year yield 4.01%. 10-year yield 4.01%. The 2-10 spread, the yield curve, is zero, ready to invert again. Oy vey. The circus continues. The bond market is slapped silly with Orion's Belt.

Note Added Monday, 10/7/24, at 7:06 AM EST: There it is. 2-year yield 4.02%. 10-year yield 4.01%. The 2-10 spread, the yield curve, is -1 bip, and inverted again.  What, Me Worry?

Note Added Monday, 10/7/24, at 6:53 PM EST: If you blinked when the yield curve inverted this morning, you missed it. The 2-10 spread quickly normalized again and spends the day 2 or 3 bips above inversion. 2-year yield 4.00%. 10-year yield 4.03%. The 2-10 spread, the yield curve, is 3 bips.