US10Y: Hit the 1D MA50. See how to trade if it breaks.The U.S. Government Bonds 10 YR Yield has turned bearish on its 1D technical outlook (RSI = 42.524, MACD = 0.005, ADX = 44.101) and since last Friday it has been trading on the 1D MA50. That was the first test of this trendline in 2 months and even though yesterday's candle closed under it, we don't have a decisive breakout yet. A candle considerably below it, should test the 1D MA100. This is part of the larger Channel Down and a crossing under the 1D MA100 validates that this is the new bearish wave. The 1D RSI already is inside a mirror Channel Down pattern as April 15th-May 15th. Our perspective is long term bearish in any case but if the 1D MA100 holds, you may trade within the Channel Down and the circles for short term buy and sell entries. Our long term target is raised a little higher on the 1.1 Fibonacci extension (TP = 3.500%).
See how our prior idea has worked out:
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Ustreasurybonds
US10Y Look for a 1D MA50 rejection.A month ago (August 21, see chart below) we argued why the U.S. Government Bonds 10YR Yield (US10Y) would go lower with the Fed having no choice but the cut the Interest Rates:
Well the Fed did it and cut the rates not just by -0.25% but -0.50%, initiating the new cut Cycle. Now let's look at the US10Y's price action on a smaller time-frame, namely the 1D.
As you can see the pattern is a double Channel Down, with the price trading below the 1D MA50 (blue trend-line) since July 03 2024. That is the current Resistance and until it breaks (1D candle closing above it), we should be looking every time for a sell near it.
Assuming the Bearish Legs of the diverging (dotted) Channel Down are symmetrical like those of May and June, our Target is 3.450%, representing a -10.50% decline (same as August's Bearish Leg).
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US10Y Expecting a bullish reversal at the bottom.The U.S. Government Bonds 10 YR Yield (US10Y) initially expanded but then took a breather on the new Bullish Leg, as per our January 24 (see chart below) buy signal, before hitting our Target:
The price is now approaching the bottom of the 2-year Channel Up yet again and by next week a 1D Death Cross will be completed. The 2 previous such formations within the Channel Up, have both been made right on its Higher Lows.
As a result, we consider this a great bullish opportunity for the medium-term. Our Target is intact at 5.000%.
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US10Y First 1D Golden Cross after 9 months formed!The U.S. Government Bonds 10 YR Yield (US10Y) is expanding the new Bullish Leg, and continues to follow the buy signal we gave on January 24 (see chart below):
The key development today is the formation of the first Golden Cross on the 1D time-frame in 9 months (since July 10 2023). This is a huge technical buy signal on its own and becomes even more so since it is so rare. The previous Golden Cross before July 2023 was on October 29 2021, which means that when the market forms this pattern, the price rallies aggressively.
That is exactly what we expect to happen now. A short-term pull-back to test the 1D MA50 (blue trend-line) similar to July 19 2023, is possible but as long as it holds, we expect our 5.000% Target to get hit relatively soon.
Beyond that, we need to see the previous Higher High breaking (similar to August 21 2023) to justify further buying. If that happens we will look for a new Higher High extension on the 1.618 Fibonacci extension level, approximately around 5.800%.
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US10Y Bearish Divergence tells us it may be time for correctionLast time we looked at the U.S. Government Bonds 10YR Yield (US10Y), it gave us a technical bounce and profitable buy signal (see chart below) as the Higher Lows trend-line held:
This time we get an opposite signal as the 1D RSI formed Lower Highs, while the price is on Higher Highs, which is a technical Bearish Divergence. The asset is still supported both by the 1D MA50 (blue trend-line) and the Higher Lows 3 trend-line since the May 04 Low.
Our strategy is to sell and target a price slightly above each Higher Lows trend-line, then re-sell if a 1D candle closes below that Higher Lows trend-line. Target 1 is 4.745, if a 1D candle closes below Higher Lows 1, we will re-sell and target 4.645 (expected contact with the 1D MA50). If Higher Lows 2 break, then re-sell and target 4.465 on Higher Lows 3 and a projected contact with the 1D MA100 (green trend-line).
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BTC Vs US02US30 SPREAD - Interesting
• 2s30s spread : The US2US30 spread refers to the yield spread between the 2-year and 30-year U.S. Treasury bonds. The chart visualizes the difference, or spread, in yield for these two bonds over time.
The 2-year bond represents more of the short-term outlook, whereas the 30-year bond is more indicative of long-term expectations. So, when people refer to the US2US30 yield spread, they're essentially talking about the difference between short-term and long-term interest rates.
During typical economic conditions, investors demand higher interest for lending money over a longer period, thus the yield of 30-year bond is higher than the 2-year. However, during economic uncertainty, the spread can narrow or even become negative (also known as a yield curve inversion), which can be viewed as a potential indicator of a forthcoming economic recession.
Yield Curve:
1. A yield curve is a graphical representation of the yields available for bonds of equal credit quality and different maturity dates. It is used to measure bond investors' feelings about risk and can significantly impact investment returns.
2. Different types of yield curves can exist reflecting the short, intermediate, and long-term rates of various bond types, such as Treasury bonds, Municipal bonds, or corporate bonds of specific issuers.
3. The shape of the yield curve varies: a normal yield curve slopes upward indicating higher yields for long-term investments; a steep curve usually signals the beginning of economic expansion; an inverted curve suggests potential economic slowdown as long-term investors settle for lower yields; and a flat or humped curve indicates little difference in short and long-term yields.
4. The yield curve can help gauge the direction of the economy, serving as a predictor for potential turning points in the economy.
5. Yield curves allow bond investors to compare Treasury yields with riskier assets such as Agency bonds or corporate bonds. The yield difference between these is referred to as the "spread", which widens during recessions and contracts during recoveries.
US10Y: Short term pullback ahead.The US10Y hit the top of the five month Channel Up, which started after a 5 time hold on the Support Zone, while the RSI shifted to LH (RSI = 68.642, MACD = 0.088, ADX = 56.354). Having completed a common +12% increase, we get the same sell signal as all prior Higher Lows. Our target is Fibonacci 0.5 (TP = 4.315%), highly likely on course for contact with the 1D MA50.
Prior idea:
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Global Equities; The decline of rationality ...... and the rise of financial engineering - manifesting in a generational shift toward pure leverage.
"When they look back at this segment of history they will probably ask: What the hell were they thinking?!"
Reporter: "How is it possible that the DJIA loses 90% of it's value? ...
B.G.: "It is very simple, really. First, it loses 50% of it's value and then, 80% of the remainder." - Benjamin Graham, from a 1934 interview.
T-Bonds (US 30 yr); Wait for it!If it walks like a duck and it quacks like a duck ... But wait for it!
In reality the Inflation-Deflation pendulum is already past mid-swing, towards the later (by most meaningful measures). Incidentally, most institutions and central banks are piled in at the short end of the curve and one could sell them anything going out past 3 years, for anything. That, in itself, ought to serve as a warning. (Yeah, they are known to be dead wrong, especially when it really matters.)
Add in (or don't!) the A.I.+ automation related speculative bonanza about long term deflationary pressures and the case would get even stronger for rates to peak at these levels.
Wait for signs of a reversal, though.
p.s. The only thing that goes up in a market crash is correlation! (I.e., T-Bonds alone will not save anyone.)
US10Y A break below the 1D MA50 will trigger a 2nd sell-off.The U.S. Government Bonds 10YR Yield (US10Y) is approaching the 1D MA50 (blue trend-line) that has been supporting the price action since May 16. The long-term trend since the October 21 2022 market top has been bearish, guided downwards by a Lower Lows trend-line but since February it has transitioned into a Rectangle. The recent July 07 High was a direct hit at the top of the Rectangle, so this week's rejection comes as a very natural consequence.
If the price closes a 1D candle below the 1D MA50, the 2nd part of the Rectangle's bearish leg will most likely be triggered. As you see during this long-term pattern, we've had two -19.70% decline sequences and if the current one turns out to be of that magnitude, we are looking at a 3.300% target.
Note that 4 days ago we formed a 1D Golden Cross, technically a bullish pattern, but the previous 1D Death Cross (bearish pattern) turned out to be the Rectangle's bottom. On that notion, the Golden Cross may have formed the top.
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US 10-Year Notes - LONGI've been loading on these like crazy, all day long.
Yields have peaked, by any measure. Also, the inevitable - continuous - U$D buying can't help but push these higher.
The Yuan/Rubble based trade, while present, is miniscule and capital isn't exactly flowing into mainland China. No one trusts the Chinese and the Russo-Chinese alliance is about as stable as a floating dice game. Hence, the Chinese central Bank's insane gold buying spree despite which gold prices couldn't muster more than an intra-day all time high, lasting all of 5 minutes.
All U$D, all day long.
US10Y: Prepare for a long term sell.The US10Y continues to trade inside the long term Channel Down since the October 21st High and has now formed the same peak formation as then. With the 1D time frame neutral (RSI = 45.126, MACD = 58.593, MACD = -0.280), the conditions have emerged for a new long term sell. If the previous -20% decline is repeated, then target the bottom of the Channel Down on a TP = 3.100.
Prior idea:
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US10Y Still room to rise but be ready to short the top.The U.S. Government Bonds 10YR Yield (US10Y) hit the downside target on our previous signal (see idea below) and is currently rising again:
Being above both the 1D MA50 (blue trend-line) and 1D MA200 (orange trend-line), we see the potential of a diverging Channel Down to emerge and establish itself (dotted lines). The completion of a 1D Death Cross, the first since August 25 2021, ensures that the long-term trend remains bearish. As a result, buy the rest of this bullish Lower High leg and be ready to sell again at the top of the original (blue) Channel Down.
If the 1D RSI gets rejected on the dashed Lower Highs trend-line, consider the potential of an early top and sell again. Our target for end of July is 3.150%.
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US02Y about to break its 1W MA50 and start a mega stock rally?The US02Y has been trading on its 1W MA50 (blue trend-line) for the past 4 weeks, closing above it on all occasions. This is a key time for (primarily) the stock market as the last time the US02Y broke and closed below its 1W MA50 (week of December 31 2018), a massive rally on stocks (which on this chart are portrayed by the S&P500 and the black trend-line) was initiated.
This was at the end of the U.S. - China trade war. The 1W RSI also shows that we are closer to that break-out than ever. Will a closing below the 1W MA50 give investors finally what they've been waiting for?
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US10Y is on the 1W MA50. Major effect on stocks and commodities!It is only 11 days ago when we called for an immediate drop on the U.S. Government Bonds 10YR Yield (US10Y) as it was at the top of both its long-term Channel Down as well as the top of the Diverging Channel Up:
The Channel Up now broke to the downside as the US10Y not only hit our 3.550% Target but closed even below the 1D MA200 (orange trend-line), with the Channel Down remaining the only pattern still valid.
The important development is that the price is testing the 1W MA50 for the second straight day and for the first time since December 21 2021. If it closes the week below it, it not only validates the 5 month Channel Up but also confirms the way for a new long-term downtrend extension towards the 1W MA100.
Needless to say, this will have major consequences on the stock and metals (Gold in particular) markets as well.
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US10Y: Trapped inside the 4H MA50-MA200The US10Y, a major driver for Gold, is trapped inside the 4H MA50 and 4H MA200, before tomorrow's Fed Rate Decision. This shows the market uncertainty surrounding this event as investors haven't yet chosen to pick sides. That keeps 4H neutral technically (RSI = 52.167, MACD = 0.014, ADX = 27.887) and we can only trade this with careful points that will be triggered after a level is breached.
A breach over the 4H MA200 is a buy (TP = 3.780 / the Resistance). A breach under the 4H MA50 is a sell (TP = 3.420 / the Support). Carefully sell on tight SL further breaches below the Support (TP = 1D MA200 and Main LL in extension).
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#EURUSD next moveIn order to analyze EURUSD move we can use intermarket analysis as well, and as you can see for a past couple of month we have high positive correlation between EURUSD and TLT ( US 20 year treasury bond ETF).
Right now that price has been trapped in a rangy area for a Days, we can say for a breakout of any side we need to see confirmation from TLT as well. which means if price wants to create a Higher high and penetrate the high we need to see TLT create new high as well and goes above the arrow on TLT curve.
However, if TLT is unable to create new high but EURUSD does there might be intermarket divergence between these two assets and that perhaps could signal for a bearish divergence which can be followed by a downside reversal on EURUSD.
A third scenario would be that they both fail to create high and turn to the downside which in this case EURUSD chance to break to the downside is higher.
A lot of news can have impact on the movement of TLT like tomorrow unemployment rate but for sure the single most important one would be federal reserve fund rate which going to be announce on 14th of December , and if fed hike rates is lower than expectation that can bring TLT Higher and drive EURUSD Higher as well.
Would Stronger Dollar Weaken Indonesia's rupiah to Rp15,000?The inflation rate has reached above 8% territory in the U.S. Higher Inflation Rate forced the Fed to raise the interest rate again by 50 basis points in May 2022 and it seems the Fed will remain hawkish for stabilizing inflation to a more normalized level. Commonly, the Increasing interest rate will make a stronger dollar because it will attract investment capital from investors abroad seeking higher returns on bonds and interest-rate products. Therefore, a bullish/Stronger Dollar outlook might prevail and potentially weakens Indonesia's Rupiah.
From Chart Perspective:
USD/IDR is moving above the Exponential moving average of 200, which means a bullish bias. Recently, The pair has broken out of the falling wedge pattern, accompanied by a golden cross in the MACD indicator. it signifies a potential bullish bias to the target area.
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FED Fund Rate, US Bonds and Inflation PredictionThe blue line area shows the historic and current FED's Fund Rate.
Looking back in the past it appears the US10Y (yellow line) is predictive of FED's fund rate upper target (orange arrows).
The US3M (turquoise line) seems to be a good indicator to get a feeling for the FED's fund rate short-term up or downward trend.
In the FOMC Summary of Economic Projections Jun 15 '2022 the FOMC had the midpoint of target range or target level for the federal funds rate at around below 4%
2022: 3,39% midpoint, 2023: 3.78%, 2024: 3.01% and >2024: 2,24% (ghost feed in the red box on the right).
So all that noted it would appear the FED Funds rate is to be expected at just below 4% at around 3.8%.
The next FOMC meeting will give as an update on that from the perspective of the FED.
And as a general indicator you need to know the FED uses the 10 Year- 3 Month Treasury Yield Spread (white line) as follows:
The 10 Year- 3 Month Treasury Yield Spread is the difference between the 10 year treasury rate and the 3 month treasury rate.
This spread is widely used as a gauge to study the yield curve. A 10 year-3 month treasury spread that approaches 0 signifies a
"flattening" yield curve. Furthermore, a negative 10 year-3 month spread has historically been viewed as a precursor or
predictor of a recessionary period. The New York Fed uses the rate in a model to predict recessions 2 to 6 quarters ahead (white arrows).
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US10Y Inflation has peaked according to the bond yieldsThis is a critical update on the U.S. Government Bonds 10YR Yield (US10Y) as it has formed a Head and Shoulders (H&S) pattern. This is a technically bearish formation that we typically see on market tops with a reversal following. It gets even stronger considering the fact that the Head of the formation hit (and got rejected on) the Higher Highs (top) trend-line of the Megaphone pattern that the market has been trading is since 2013.
There is however a possibility of not dropping to a correction before one last test of the Higher Highs as it happened both on mid 2018 and the September 2013 H&S patterns. As a result, we should approach this in terms of Resistance and Support break-outs. Above the Resistance, expect one last Higher Highs test, below the Support expect a plunge towards the 1D MA50 (blue trend-line) and the 1D MA200 (orange trend-line).
But why is this US10Y top formation pattern so important and what does it have to do with the Inflation Rate (red trend-line)? Well as you see within this 9 period price action, the two symbols are very correlated. In fact, every time the US10Y hit the top of its Megaphone pattern, Inflation peaked and started to follow the US10Y lower on its correction.
As a result we can say that this is the first indication we've had in a long time that the raging inflation that started in May 2020, may finally be getting under control. If so, this could be the ideal time to get back into stock buying as early as possible.
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How long could deflation last? What about bonds?As most commodities are currently collapsing, it is very hard to keep believe that inflation is going to go higher from here. June could be the first month with a negative MoM CPI print, but it probably won't be the last. As deflation is taking inflation's seat, bonds have been looking attractive for some time. Essentially we got a blow of top in yields (capitulation bottom in bonds), and now bonds are rallying. It's totally normal as bonds took out the lows, and are now showing major strength at a time where the dollar is strong, while commodities, stocks and real estate looking weak.
The truth is that there is no escape from a major global recession. Commodities could fall a lot more until Central banks reverse course. There is too much debt and the only way to get out is by printing, while all the rate hikes will only eventually result in a crash. It's just that rate hikes have a delayed effect and most investors haven't realized what is coming yet.
Is the inflation story over? I don't think so. We are just in a very a nasty recession, that could lead to a deflationary collapse. Essentially a liquidity crunch that would cause investors to capitulate, and then force the Fed to step in to save the system. There is no way the Fed will hike rates more than 0.5-1% from here, and there is no way the Fed won't be forced to cut rates and resume QE by June 2023. The bond market reversing like this is an indication that the Fed is about to make a mistake by raising rates once or twice in the next few months, as bond yields are already coming down.
It's interesting that bond yields rose more than in 2018 before they reversed and fell below the Fed Funds Rate (FFR), yet FFR is currently 0.75% lower than when the Fed paused in 2018. Could easily see FFR getting down to 0 in the next 12-24 months as the financial system faces collapse yet again, but I don't see bond yields going as low as they did during Covid.
What I see is long duration bonds going up to the key breakdown zone, around 130-135 on TLT or bond yields going up to 2.4-2.6% before moving higher again. Essentially I do see a major deflationary episode ahead, I do believe bonds can go up, I don't believe the Fed will ahead of the problem and that there isn't much they can do. However at the same time I don't believe that the inflation story is over, as I do see higher inflation coming once we are done with this episode. Why? Because a lot of production of stuff will go offline, while governments print a ton of money to save the system. Less goods, more money... No way inflation won't happen again. The debt bubble is popping and long term this is inflationary.
So far we've seen bonds divergence from their long term trends, first with a blow off top, and then with a rapid decline that swept the lows. Could we get back into the main trend? It's possible, but I don't think so. All I see is a similar retest to what we go in 2021, where bonds broke down and then retested the breakdown level before going lower. TLT will fill the gap and then decide where it wants to go. Definitely wouldn't be surprised if bonds chopped in a certain area for a while, but ultimately I think we are going lower. Of course we could go lower even during a deflationary period, as everyone is liquidating whatever they can. If people need dollars, they will sell anything for them, including dollars. At the moment bonds are still very attractive, yet this doesn't mean that if people need cash they will hesitate to sell them.