The Wall Street analysts and television pundits proclaim that rates have nowhere to go but up. Maybe they are right and maybe not. Taking a look at the UST10Y yield weekly chart above, the Aroon shows that everyone believing that rates will nudge higher continue to view same, and those not believing that rates would rise have now thrown in the towel also believing that rates will go higher. If you think rates will go higher, how do you like having everybody and his bro, including the uber driver and pizza guy, also believing rates will go higher while no one is at the lower rates ahead party?
For the last few months, the US 10-year yield has been stumbling sideways like a drunk in Times Square on Saturday night. The blue sideways symmetrical triangle pattern is in play. Yield has not yet made a new high so neggie d cannot yet be assessed, although the indicators are uninspiring for a breakout higher in yield. The yield is at the upper trend line of the triangle now so you will know over the coming days and next week if yield can push higher up through the trend line that would then become support, or, yield may hit its head on the trend line and collapse lower remaining inside the apex of the triangle.
The straight side of the triangle is about 125 bips (1.25%). Thus, if yield breaks out higher here from 4.56%, the 5.81% level is the upside target. A lot of times, Keystone likes to use the first touch in for the vertical reference, the light blue line, that is about 100bips (1%). Thus, a breakout higher in yield from 4.56% would target 5.56%.
On the downside, if yield collapses and falls out the bottom of the triangle at 4.25-ish, the downside landing target is 3.00%-3.25%. The chart is not tipping its hand but if yield breaks higher, and the MACD line turns up for a higher high, and the RSI begins higher, yes, higher yields are on the way at least for a couple weeks.
Interestingly, the 2-year yield chart (not shown) is teasing towards prior highs in yield while setting up with neggie d so the anticipation is for yields to likely drop going forward on the weekly basis.
The universal consensus parroted by all Wall Street personalities is that inflation moving higher means yields will move higher and stocks will sell off while lower inflation means lower yields and party time for stocks.
The stock market is setting up for a pullback. The SPX weekly chart is in neggie d so the top is at hand right now (Keystone is short the broad market via ETF's but Keybot the Quant remains long). So what happens when stocks go through a multi-week pullback? Some folks will seek safety which means they will buy notes and bonds sending yields lower. Whozzit? Whazzit? None of the pundits allow this scenario.
Of course that is why it will happen. Stocks will pullback for a multi-week slide lower and yields will drift lower as well. Watch the triangle above to see which side the breakout occurs for yield. The ADX is down in the cellar verifying that there is no strong trend in place for the 10-year yield (instead it staggers sideways).
If you are a budding technician that is learning about charts, here is the Advanced Sideways Symmetrical Triangle Pattern 401 course. Watch for false breakouts because the true breakout will come later in the opposite direction. Sometimes, price, or in the case of the chart above, yield, will breakout, or breakdown, from the triangle hinting at the direction ahead, only to pull an about-face and run back into the safety of the inside of the triangle. A false breakout usually occurs about halfway through the pattern or 2/3rds through it so you always want to be on alert to see if it happens.
For example, for the chart above, yield may breakout a bit higher, but then over the next week roll back over and drop returning to the inside of the triangle. This would be uber important because it is likely telling you that the yield will likely collapse out the bottom of the triangle going forward. Thus, in this case you would buy notes and bonds expecting lower yields.
The opposite can also occur, price, or yield, could fall out the bottom of the triangle but then pull a reversaroni and head higher back into the safety of the triangle. This behavior tells you that price, or yield, whatever the chart is, will likely explode up and out of the triangle going forward so you would position for that trade.
June should be a lively month and reward stock market bears and note and bond bulls (higher note and bond prices lower yields). Keystone does not hold any positions in Treasuries currently. Any future trade would be expecting higher note and bond prices and lower yields in the weekly timeframe ahead such as buying TLT or shorting TBT. You can use the same sideways triangle study on TBT and TLT to see how those charts progress especially TBT. 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 7:22 PM EST: The 10-year note yield finishes today at 4.62% a gain of 6 bips. Notes and bonds were sold (prices lower yields higher) as stocks move lower; thus, same-o expectation of every pundit on Wall Street but one day does not tell the tale. The 4.62% is sitting on that upper blue trend line of the sideways triangle pattern so the next few days of trading likely tells you the direction of yield for the next few weeks ahead. That is exciting. If you had to forecast up or down after today, the obvious conclusion is up for yields going forward but cool your jets, Sonny. You have to give it a few days. Yield may continue higher and never look back. Yield may pop a bit tomorrow to end the week forecasting a continued move higher only to be a fake-out move discussed above and for yield to return to the inside of the triangle and then collapse out the bottom. Yield may simply reverse right away as it struggles with the upper trend line resistance and fall down but remain within the safety of the apex of the triangle. Simply watch it for the next few days and it will tip its hand. As mentioned, stocks are likely going to sh*t the bed and collapse,sell Mortimer sell, so traders will be selling stocks and then some of that money will go into the perceived safety of Treasuries sending yields lower.
Note Added Friday Morning, 5/31/24, at 3:34 AM EST: Yesterday, the 10-year comes back down to 4.55%. Stocks sell off and notes and bonds are bot sending yields lower.
Note Added Monday Morning, 6/3/24, at 2:26 AM EST: The 10-year is down to 4.48%. The 20-wk MA is 4.33% and 50-wk MA is 4.28%. The bottom rail of the triangle is 4.25%-ish and this keeps creeping higher as yield plays within the apex of the sideways triangle still deciding which way to break. Call the lower rail 4.30%; if support is lost here, yields will collapse far lower. However, at 4.48%, that is another 18 basis points.
Note Added Monday Afternoon, 6/3/24, at 2:22 PM EST: The 10-year is down to 4.39%. Now things are getting interesting with support at 4.25%-4.35%. The United States interest payments now exceed all other government expenditures except social security. The interest payments on debt are greater than the national defense and Medicare budgets. America's crony capitalism system is in its last throes. Human greed destroys everything. Both corrupt political parties want Americans to band together to protect a crony capitalism system that only served to make the wealthy class rich at the expense of everyone else. That is laughable. Millions of Americans no longer give a sh*t. The rich took all the money to live lives of leisure and luxury but they will come to realize their greed was too excessive as society crumbles.
Note Added Wednesday Morning, 6/5/24, at 8:01 AM EST: The 10-year is down to 4.31% yesterday ending the session at 4.33%. The 200-day MA is 4.35%. The 20-wk MA is 4.34%. The 50-wk MA is 4.29%. The bottom rail of the triangle is 4.30%-ish. Mix it all together and it is easy to understand that yield is at critical support and is deciding to bounce, or die. The 10-year is currently trading at 4.32% and will probably wait for the Jobs Report Friday morning before making the bounce or die decision that determines the direction forward.
Note Added Wednesday Afternoon, 6/5/24, at 5:00 PM EST: The 10-year is down to 4.28%. She is testing the critical support and likely waiting for the Jobs Report when either a trap door opens on the chart above sending yields far lower (die; collapse through support), or, a springboard occurs sending yields into the stratosphere (bounce from support). Where's the 99% of Wall Street analysts that said a near-term move of the 10-year yield up to 5% and higher was a no-brainer and would easily occur. They are quiet the last few days, hiding under their mahogany desks, praying for the bounce in yields so they do not look like jackasses.
Note Added Sunday, 6/9/24: The Jobs Report hits on Friday morning serving to muddy the waters further with nearly 300K jobs but the unemployment rate rises above 4%. The 10-year yield pops 15 basis points (notes and bonds selling off sending yields higher) to 4.44% which is the exact 20-day MA overhead resistance. Yield will either bounce or die from 4.44%. The 50-day MA is at 4.49%. The 10-year yield is the catty girl at the dance first teasing a breakout upwards, then teasing a breakdown, but now in the safety of the apex of the triangle still deciding which way to go. Traders will want to see the inflation data and Fed speak this week as well as note how the AI hype is proceeding.
Note Added Thursday, 6/13/24, at 6:40 PM EST: The 10-year yield drops to 4.25% on the verge of falling out of the sideways channel ushering in far lower yields ahead on the weekly basis. It is time to gird your loins. Yield must bounce, or die. As per the above, if 4.25% fails, yield will likely seek the 3.00%-3.25% landing zone in the weeks ahead. A drop in yields makes sense, on the weekly basis, since stocks are set-up for a multi-week pullback. Traders will sell stocks and buy bonds sending yields lower. The excitement builds. Will the bottom rail of the triangle at 4.25% fail?
