$TLT $IEF $LQD $US10Y US 10-Year Yields Continue to FallYields on the US-10 Year Treasury continue to head lower, as they approach a multi-year support of 1.426% (blue), a level not seen since July 2016.
"Risk Off" continues to be in play.
Treasuries
The Bond Market - Historical Levels
We are currently witnessing levels is the Bond Market that have never been seen before. Again today, the US02Y-US10Y have inverted multiple times. The US01M-US03Y have now also inverted. We currently live in a time where debt is out of control and unfortunately there is no end in sight.
History shows, within 6-18 months after a US02Y-US10Y inversion, the US economy falls into a recession. The question now becomes, does history repeat itself once again?
We all know that the US Stock Market has been on what many would call a parabolic uptrend. Is the US Stock Market at fair value? Or does it at some point return to fair value? That remains to be unknown at this time as all we can do is allow the future to play out.
I've currently been working on a script (Pictured Above), that helps me visualize the Bond Market and Yield Curve in a different way. The moves again today have been very interesting.
Best wishes,
OpptionsOnly
FOMC Madness: volatility risesPowell rocked the markets yesterday:
“Let me be clear: What I said was it’s not the beginning of a long series of rate cuts. I didn’t say it’s just one or anything like that. When you think about rate-cutting cycles, they go on for a long time and the committee’s not seeing that. Not seeing us in that place. You would do that if you saw real economic weakness and you thought that the federal funds rate needed to be cut a lot. That’s not what we’re seeing.”
But is a 25 basis point cut meaningful in the long run? Markets wanted further easing from the Fed yesterday. Bond traders aren’t as confident a “mid-cycle adjustment” in rates will be enough to keep the economy afloat.
Volatility:
We saw a -2SD plunge in response. Volatility is back. Hopefully it continues higher from here and lasts at least a few days.
VIX reached 16 handle. This ain't over boys. (Normalizing back to the decade average at 17% is still almost 3 weeks late at this point. ) The great thing about trading options strategies is we can hedge this market madness.
USD/DXY:
This morning has the dollar higher and has got everyone talking. You'd think lower rates are bad for the USD. With more rate cuts on the way, it seems like an unexpected USD move. Perhaps markets priced in too many cuts and are now backtracking.
Gold:
This alternative asset class hasn't been immune to the vol. A big move in /GC overnight down 2%. Gold bugs coming back in recent hours.
Bonds: Treasury yields took another plunge today.
The bond yield curve is inverted at the 10y-3mo spread.
The 2- to 10-year spread, one of the most closely watched indicators of impending recessions, shrank to the narrowest since March. It is not inverted at the moment, but it ain't bullish when it finally does.
Other data:
Weekly jobless claims higher than expected 215k vs 214k expected
This month, the regional surveys point to further weakening in U.S. manufacturing.
US July ISM manufacturing index 51.2 vs 52.0 expected.
Black swans still lurking everywhere;
Chinese forces building on the HK border.
North Korea says it tested crucial new rocket launch system and fired missiles for second time in a week.
We continue to watch for opportunities in volatility selling on the main indexes.
$IEF Bond Rally FadingDespite the market chatter of rate cuts by the Fed at the end of July, it seems that one area of the market that is not paying much attention are US 10-Year Treasuries ($IEF as a proxy).
After posting an "Evening Star" pattern on July 3rd, US Treasuries have been selling off since. As can be seen in the attached chart, the RSI has been showing negative divergence in relation to recent price rises, indicating that investor sentiment is fading, despite prices marching to record highs. Furthermore, the price is fighting hard to stay within the FR100 at $110.40, indicating that it could fall out of this area any day now.
Going forward, it appears that the rally in US 10-Year Treasuries is fading, and caution investors to take heed in this space
ES1! AB=CD WEEKLYCURRENT LEG SUPPORT A STRONG MOVE DOWN 2700-2500 RANGE
CURRENT DOUBLE TOP
CURRENT OSCILLATION TURNING POINT
WITH A LOT OF HANDS HEAVY LONG SUPPORTED BY CHINA TRADE MEDIA PUMP ES COULD VERY WELL SMACK DOWN INVESTORS 3RD QTR
3000 IS STILL A C>D TARGET
CURRENT MOVEMENT IS B>C
A>B HAS BEEN SATISFIED TWICE WHICH MEANS A DOUBLE TOP
TLT is another Dunk!Buy line and sell line. Play this until a week before next fed meet up. Rates will be cut. If first cut is big I dump if not I hold and sell just before next cut.
10 year T Note: New long term bull cycle emerging?TNX has been trading within a 1M Channel Down since 2000 up until January 2018 when it broke the pattern upwards. The mini uptrend found Resistance on the MA200 and has been declining for the past 7 months. We are currently on the most support tests of all, as it has touched the 2000 Channel's Lower High trend line and will test it as a Support for the first time. If that provides a bounce then we may be at the very beginning of a new very long term bull cycle. A Golden Cross formation should come as confirmation.
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Bonds on a TearMay's "Risk Off" has catapulted Long-Term Corporate Bonds (LQD) and 20+ Year Treasury Bonds (TLT) into two of the top 5 performing assets YTD:
LT Corp Bonds: +10.41%
20+Year Treasuries: +9.02%
Bonds on a TearMay's "Risk Off" has catapulted Long-Term Corporate Bonds (LQD) and 20+ Year Treasury Bonds (TLT) into two of the top 5 performing assets YTD:
LT Corp Bonds: +10.41%
20+Year Treasuries: +9.02%
The Next Bubble, where is it? Bitcoin/Crypto analysisAll my thoughts are on the chart.
For reference, definition of treasuries yield curve:
According to Investopedia, the yield curve graphs the relationship between bond yields and bond maturity. More specifically, the yield curve captures the perceived risks of bonds with various maturities to bond investors.
The U.S. Treasury Department issues bonds with maturities ranging from one month to 30 years. As bonds with longer maturities usually carry higher risk, such bonds have higher yields than do bonds with shorter maturities. Due to this, a normal yield curve reflects increasing bond yields as maturity increases.
However, the yield curve can sometimes become flat or inverted. In a flat yield curve, short-term bonds have approximately the same yield as long-term bonds. An inverted yield curve reflects decreasing bond yields as maturity increases. Such yield curves are harbingers of an economic recession .
Buy Bonds and Buy DollarsA number of string events appear to be shifting the economic landscape around the world of late. Extreme euphoria one year ago ("Economies are booming, time to raise interest rates more"), turned into panic at the end of 2018 with slowdowns across the board. The prompt support provided by US officials (is keeping markets going up their job?), made everyone forget the issues, problems and fundamentals... Back to business as usual, just keep buying!
The treasuries market however is a boat much harder to steer and is subject to global flows of capital - this market started saying a different story... Yields tend consistently to indicate the path for economies... The smart money is always in search of yield for a given amount of risk. When the balance of the two shifts re-allocations occur at a global level, moving the respective markets accordingly. A slowing world growth / economy increases risks in regions and markets that traditionally support higher returns. At the moment fundamentals in economies around the world are deteriorating, prompting investors to switch their focus to risk-management, as opposed to returns.
A break-out of the 10 year yield channel at the beginning of the year, sent everyone to the gates ("interests going to 4%, 5%, 6% etc.), just to be proved wrong in the recent sell-off. The re-entry in the channel is further compounded by the 3M-10Y yield curve going negative - a hotly debated topic and one for which everyone has an opinion... But the common attitude on the street is "this time is different..."
The spike in yields over the last 1-2 weeks is most likely just a "breather" before moving again to the downside. In short, economies around the globe are slowing... The US is not a leading indicator of yields for the rest of the world, it just appears to have managed to put some ammunition in its arsenal for when things turn south (something other central banks do not have - e.g. EU, Japan etc.).
So... Buy Bonds and Buy Dollars
10y-3month yield spreadGetting close to inversion. If the 10y keeps the breakout momentum up, we will invert soon.
US treasury yields triangle breakout (good for USD)Treasury yields look to be breaking out of a triangle pattern from LT support. Pullbacks could represent a chance to join move higher
10 YEAR TREASURY NOTE LONG TERM BY DANIEL BRUNO, CMTDANIEL BRUNO, CMT
BE SURE TO SEE MY T-NOTE CHART LINKED BELOW
LONG TERM TREND IS DOWN
CURRENTLY AT THE 2/1 GANN,
INFLECTION END OF MARCH AT CROSS OF 2/1 WITH THE 45 DEGREE 1/1
Triangle On Treasuries Suggests Limited Upside On StocksHello traders!
Today we will talk about treasuries (10year US Notes) and stocks (S&P500).
Well, as you may already know, treasuries and stocks are more or less in negative correlation and what we have noticed that 10y US Notes can be forming a big bullish triangle, while S&P500 can be finally finishing a five-wave rally from lows.
In EW theory, triangles are usually continuation patterns, so seems like treasuries can be headed higher, which means that stocks can see limited upside, especially now when we can clearly see five waves up from lows and according to EW rules, after every five waves, a three-wave pullback follows!
That said, if we are right, then ideal scenario would be a rally into the final wave "v" on treasuries, while stocks may see a deeper a-b-c correction! So, be aware of a potential sell-off and risk-off mode on stocks.
Disclosure: Please be informed that information we provide is NOT a trading recommendation or investment advice. All of our work is for educational purposes only.
Futures on UST10, March '19 Let's take a look on March '19 ZN. What's next - cont. upside PA or yield surge!? Let's see!
Watch Treasuries for signs of the next Equity selloffThe inverse correlation of Stocks and Bonds have been quite telling in the recent months of equity volatility.
The 10Y yield went from 3.25% in early Nov to lows of 2.55% as participants flew to safety in treasuries.
In the last couple weeks as equities have recovered from the Dec 24th meltdown, treasuries have been sold with yields resting now around 2.75-2.8%.
I am looking to see demand for treasuries as the major Equity indices test overhead resistance.
After a 14% rally on the S&P in a matter of a month a pullback looks likely.
If we see 10Y yields once again trending down expect blood for risk assets.
Cheers
IEF found support!IEF has bounced off of its double top created during the recession. This has created a hard support.
Not only that it has bounced off of it before in a similar fashion between 2013 and 2014.
Volume is dramatically increasing at this level, the moving averages are flattening out.
All of these are bullish signals.
* This information is not a recommendation to buy or sell. It is to be used for educational purposes only.
Long TLTI believe NASDAQ:TLT is breaking out.
The main thesis I have been following is global slowdown is coming within the next 2 years.
If this occurs the Fed's hand will be forced to stimulate the economy by having constant or lowering rates.
From this we can derive that NASDAQ:TLT must go up since rates and bonds are inversely related.
Finally with NASDAQ:TLT breaking out of this wedge and the potential short squeeze could lead to a huge rally just like 2007-2008.
The rally from its bottom (May 2007) to the top (Dec 2008) is a 50% return.
* This information is not a recommendation to buy or sell. It is to be used for educational purposes only.
The relationship between MERVAL and US Treasuries spreadThe relationship between MERVAL and US Treasuries spread.
Forecast US 10 year treasury yieldThis is an attempt to forecast the yield on treasury notes based on technical analysis. Clearly this is an incomplete analysis as fundamentals will also impact heavily. So let us consider the following a base case. First, there are trends in the yield. I would not call it cycles because they have different duration. Those thends tend to last a longer time, more than six months. I use the average trend duration to make a forecast of the bottom. Second, Fibonacci is used to make a price projection. 38% retracement would mean going down to 2.5% (from 2.8% today). 62% retracement is 2.0%. The fall in yield will not be smooth and will have ups and downs (indicated by an ABC pattern from Elliott. but it could equally well be an 12345).
Forecast: In July 2019 the yield will have fallen substantially. A good benchmark is 2.3%.
The analysis is incomplete because it does not take explicit Fed action into account. A 10 year yield of 2.5% would invert the yield curve even without any further increase in the short term rate by the Fed.
