Treasuries
US 10-Year Treasury Yield Bullish Engulfing in Focus Before FedThe US 10-year Treasury yield left behind a Bullish Engulfing candlestick pattern on the daily chart this Friday.
This is as the bond tested a rising range of support from August.
A turn higher from here could open the door to revisiting the October high of 4.33.
Otherwise, breaking lower exposes the 50-day Simple Moving Average, which could reinstate the upside focus.
All eyes next week turn to the Fed, which is expected to deliver a 75-basis point rate hike. The focus will rather be on their language going forward as markets increasingly expect moderation.
TVC:US10Y
How low can bonds go?Months ago, when 10 year bond futures were still 175, this weekly head and shoulders pattern jumped out at me. It looked so big and so bad I almost didn't want to believe it could play out.
Now, as we approach 135, this massive, fully triggered pattern may be the best indication of where bonds are headed: 125.
Sure, they could bounce a few times as they have done on the way down, but ultimately June 2011 lows are the likely stopping point on this decline.
BONUS: As you can see, I didn't count the massive March 2020 wick or include it in the measured move. Better to be prepared for the UB to overshoot the 125 target by a little or a lot before staging any meaningful comeback.
Treasuries accelerating their decline from oversold conditionsTreasuries accelerating their decline today free falling from already historic oversold conditions on multiple time-frames.
Feels pretty broken to me, but that doesn't mean we can't break further.
On watch for a true dislocation/break down/panic on further weakness.
Bonds Recover After CPIBonds took a dive to break lows and hit our target of 110'05. A green triangle on the KRI confirmed support and we immediately the dip was immediately bought back, and we recovered the range between 110'27 and 111'26. We are currently hugging the upper bound of this range. The move followed yet another hotter than expected CPI print and a slump in retail sales. The Kovach OBV is slumping, so we expect the range to hold as the markets digest this data.
Shorting EUR again, now on the pullback.The euro, as well as all its correlated currencies and related products, crossed critical support levels a few weeks ago and right now is in a pullback within the mid-term downtrend.
The mid- and long-term trend are in phase 4 (bearish), and the RSI on the monthly chart is 23.32, which make it unreasonable to hold it. After our shorts and currency strategies a few weeks ago, right now we are 50% in EUR and 50% in USD (take into account we are, mostly, European based), but we will advance everything to USD to follow the trends of the world economy and the recession in the next months.
Trade:
Financial engineering: cash, not derivatives.
Time horizon: >6 months.
Risk mgmt: +20% of our treasury
Exits: We do not contemplate exits for now, but we are active quant traders and monitor the market daily.
Bond Market Gains from Risk Off ToneBonds appear to be gaining strength as yields relax and the US dollar pulls back hard. The Kovach OBV is edging up, but we have resistance confirmed by several red triangles on the KRI at current relative highs. We appear to be seeing a bull wedge forming, in an attempt to break through 113'00. If so, then 113'12 will be the next target. If not, we will find support again at 111'26.
$TLT - 20Y Bond index - BUY?Clearly, inflation is a problem and I for one thought the rates rising were overblown after the first hike. (I was very wrong here) With that said, we are likely in the topping process for inflation, pending any new black swan events happen. The indicators show 4 things in regards to this bond. 1. No momentum, 2. Bear market trend 3. below the historical anchored V-WAP (so most who own this EFT are underwater) 4. Bottoming on a Fib.
The best way to play this is to buy tail-risk long-dated calls. Keep position small given the macro market, but clearly, this is an opportunity that hasn't been available for a while in the bond market.
EUR/USD falls to new 20-year lowThe euro is in negative territory today, after posting six straight days of losses. EUR/USD is trading at 0.9553 in Europe, down 0.41%.
September can't end fast enough for the euro, which has declined a massive 4.8% against the dollar. Earlier today, EUR/USD fell to 0.9536, its lowest level since June 2002. With the war in Ukraine escalating and Nord Stream reporting that its pipeline was deliberately damaged, it's hard to be optimistic about the euro's outlook.
The sham referendums in Russian-occupied Ukraine have ended and predictably, the vote to join Russia was close to 100%. Moscow is expected to declare on Friday that the territories are being annexed to the Russian Federation, sparking fears that Russia could resort to nuclear weapons to defend what it claims is Russian territory.
There was a further escalation in the Ukraine war last week, as explosions at the Nord Stream 1 and 2 pipelines are suspected to have been sabotaged. Nord Stream 2 has been shelved and Nord Stream 1 has been shut down for weeks, and any faint hopes that Russia might renew gas exports through Nord Stream have been dashed. European natural gas prices have jumped in response to the news.
The US dollar continues to rally, and 10-year Treasury yields pushed above 4.00% earlier today, for the first time since 2008. The markets are showing a healthy respect for Fed hawkishness, even after inflation weakened in the past two inflation reports. There is some optimism that the current rate-tightening cycle is reaching its end, with Fed member Evans stating that it will be appropriate to slow the pace of tightening at some point. For now, the US dollar has momentum, driven by an aggressive Fed and weak risk appetite.
EUR/USD is testing support at 0.9554. Next, there is support at 0.9419
There is resistance at 0.9640 and 0.9711
The Bond Market Reacts to the FOMCBonds have slid further and there is no relief rally insight. The markets were hoping for a 'dovish hike' in the sense that the 75 bps hike would be followed by dovish rhetoric. In fact it was the opposite. Yields have maintained highs pressing prices further down. We are hugging 113'12 and expect support there. If not, we will use Fibonacci extension levels to determine support levels further down. Our targets are 115'03 and 115'29 if we get our relief rally.
7-10 Year Bonds May be Ready To Go Up due to the FOMC ActionsI will be buying bullish exposure to 7 and 10 year treasuries as a result of topping out inflation and the fed's aggressive actions to kerep it down.
Bearish Divergence on the US10 Year YieldIf we can see tthis begin to come down from here we will see stock continue up and the dollar return down.
Why Bonds Might Be Nearing LowsBonds have continued their decline as the markets price in a potentially historic FOMC rate hike this week. Inflation data suggests that the Fed's rate hike trajectory is not really working and inflation is still soaring. On the other hand, multiple indicators suggest that we are in a recession, and the Fed will have to pivot their hawkish stance after this last rate hike. If that is the case, then we expect the bond market to be nearing lows. We have one more technical level before we will have to start using inverse Fibonacci extension levels to predict lows in bonds again, as 113'12 is our last technical level. The Kovach OBV also appears to be leveling off. The next targets from above are 115'03 and 115'29.
Bond Market Continues to Price In Hawkish FedBonds have picked up slightly edging above 115'29. ZN had teetered about this level, breaking below it yesterday, but finding support. We did make a run for the next level at 116'20, but rejected this level, and found support again at 115'20. There is a stronger chance of a 75bps rate hike, which is pushing up yields. If we fall further, then 115'03 is the next target.
Bond Market Reacts to Nonfarm and FedBonds fell again, hitting our next target at 115'29. Yields are creeping up as the markets are pricing in the next rate hike, expected to be 50-75 bps . Nonfarm payrolls gave us some insight into economic conditions: unemployment rose to 3.7%, with a headline miss and downward revision. This suggests that the economy is weakening further, and we are in a period of stagflation. Yields subsequently weakened and we are seeing a slight pivot off 1529. If we rally, we could hit 116'20 or even 117'08. If the figures are hotter than expected it should bolster the Fed's hawkish rhetoric and we could break through 115'29, to 115'03.
Hawkish FED Keeps USD In UptrendUnfortunately, stock markets are where they are, and we cannot force them to move in a particular direction. We see a neutral status at the end of the summer, but this volatility may come back in September. We may see some interesting price action already this week when US will release its important jobs data. Fed watches this data closely, but what’s important is that they were very clear lately and said that they will stay hawkish even if FED’s actions will cause some harm to the US economy . So for now, the USD remains in uptrend because of US yields.
From an Elliott wave perspective, we see US yields trying to break higher into a fifth wave now, so this can cause even more weakness XXX/USD pairs.
But when the fifth wave will hit a new high on yields, that’s when we should be aware of a new change in cycle, ideally later this year.
But any major reversals in cylce will not happen that easily, especially now with current FEDs actions and potential bad data. Bad or good data; it doesn’t really matter; the stock market will have a hard time turning back to the highs. Yes, stocks can stabilize if we see bad data, but if we will start seeing bad data week after week then this means a big economic slowdown and a potential recession.
Expensive capital, inflation, and economic downturn is a bearish case for stocks. There is simply no "free" cash available to be invested in the stock market.
10 year notes broke out of the bullish wedge as expected10 year notes broke out of the bullish wedge as expected.
Bulls have a setup for a large five wave up rally in T-notes (meaning decline in 10 year yield)
Stagflation is comingReal interest rates will probably start to fall soon because of stagflation.
Real interest rates can be measured by subtracting inflation expectations FRED:T10YIE from US treasury yields FRED:DGS10 .
Treasury yields will likely fall along with unemployment as measured by initial claims FRED:ICSA .
Initials claims has started to slowly rise and when it does treasury yields will probably go down.
Inflation expectations will likely take longer to fall because it takes longer to get prices to slow down than for unemployment to rise.
Businesses will more likely fire people than lower their prices to protect their profits and now inflation expectations are probably well anchored.
This should be bullish for silver OANDA:XAGUSD and gold OANDA:XAUUSD and negative for the dollar TVC:DXY .
When looking at the charts for primary metals and DXY it also looks like they are ready for a major turnaround.
A description of the above can also be found here:
www.forbes.com
long US30 treasuries hereUS30 treasuries are hitting a resistance line, 50 MMA and a high RSI and MACD. It seems like a good risk / reward to buy some treasuries here.
If the recession is starting it should put a downward pressure on inflation and treasury rates.
I will buy some TLT ETF and SPPX ETF.
Forget All Other ChartsIgnore all the other charts right now. They are based on DOLLARS. The dollar is permanently unstable and your imperialist overlords are here to take away your spending power. We're due to see bearish action similar to April 5th (pink dot). The question is, will we see a lower high in relative yields, or will we set a higher low and possibly become uninverted, and return above 1.0 once again? Consider that we just set a higher high in the S&P medium term and it could have simply been a move to fool the crowd. On the other hand, debt is at all time highs, and rates even at this level mean systemic insolvency. Raising rates further means quicker insolvency. I say just get it over with or don't do it at all. Inflation year over year is, realistically, 20-40%, each year since 2020. Key interest rates aren't even 10% of that. There is no way they will be able to control this in any way, shape or form, or manufacture a so called "soft landing".
Rates rise >1.0 = total collapse, then easing
Rates bounce <1.0 = unrealistic rally blow off top, more tightening to trigger the crash
I think I used too many arrows but hopefully it makes sense.
Good luck and don't forget to hedge your bets.
Dollar and treasury yields are back on the marchU.S. Treasury yields moved higher on Friday to their highest since July 21 and U.S. stock futures fell by almost 1%, along with similar losses in Europe. The yield on the benchmark 10-year Treasury note was up 8 basis points at 2.967% as the Fed indicated July meeting minutes that it would continue hiking rates until inflation slows down significantly, although the central bank could soon decrease its pace of tightening.
The 10-year Treasury yields above its 100-day exponential moving average, yields may extend its strength to 3.00% mark with the dollar's rally.
S&P vs UST YieldsYields are going crazy right now. Everything seems like a disaster. Oddly enough, when these particular yields invert (gray boxes), the 10/2, it is historically not the best time to go short, but rather you would have benefited if you had shorted AFTER yields uninverted above 1.0(red dots). Now, okay, maybe this time is different, a ratio of 0.87 isn't exactly sane at this point and maybe the whole thing comes crashing down. It's also true that about a third of this chart represented a fundamentally bullish and arguably much more healthy market, and this is true, we could have samples that don't exactly reflect current conditions. What I'm not so certain about is the idea that the market being bearish or bullish is somehow a barometer of what's going to happen next. At the end of the day, monetary policy rules market prices and perhaps this can be taken as sign that perhaps we don't *really* know what's going on behind the scenes, which strings are being pulled, and how hard. The market is not the economy. The FED has a trading desk at the NY Stock Exchange. Let us ask this question: if it is not absolutely necessary in their eyes to have such a trading desk, why would it exist? Could it be the case that it's simply there and yet they aren't using it? I think that is the less probable scenario.
Take it as you will. Considering the sharp cataclysm of yield inversion, I'm not sure this could constitute trading advice, but I thought it was interesting, as it could be considered bullish evidence for a "last rally" into a mammoth sized selloff.
What do you think? Still bearish? Bullish all the way? Even more confused now!? Have I gone completely crazy?? Let me know!
Thanks for taking a look, take care, and don't forget to hedge your bets.
US02Y/US10Y bonds signals end to market rally. Bear FlattenerUS02Y up ~6%
US10Y up ~0.12%
Definition of a Bear Flattener = market go down.
Is it a perfect indicator? Of course not. But the tendency is that bear flatteners mean money is coming out of the market and going into short term bonds where it can come out of the quickest if market turns around. So the short term bonds act as a kind of pump/dump for the market. We are getting bear flattener headwinds ahead of CPI print next week.
Next week maybe market flattens out, momentum dies, slow stochastic falls below 80, and price sets up to go below prior "higher lows".
Keep on alert.
