ZN - 10 Year Note 2 HourNews this coming week will impact Markets in a broad fashion.
ZN can see a larger RT to overhead POs as can ZB (30Yr) should
The FED engage in larger YCC interventions, and I believe they will
intervene heavily.
Macro Data Ahead:
MONDAY, MAY 16
8:30 am Empire state manufacturing index May
TUESDAY, MAY 17
8:30 am Retail sales April -- 0.8%
8:30 am Retail sales excluding vehicles April
9:15 am Industrial production index April
9:15 am Capacity utilization April
10 am NAHB home builders' index May
10 am Business inventories (revision) March
WEDNESDAY, MAY 18
8:30 am Building permits (SAAR) April
8:30 am Housing starts (SAAR) April
8:30 am Philadelphia Fed manufacturing index May
THURSDAY, MAY 19
8:30 am Initial jobless claims May 14
8:30 am Continuing jobless claims May 7
10 am Existing home sales (SAAR) April
FRIDAY, MAY 20
8:30 am Advance services report Q1
Zn!1
Unchartered Territory-TNXAnyone who thinks they know for sure what's going to happen in this market should follow price action very, very closely. TNX just closed the month of March by very bullishly crossing the monthly cloud. Since the 1980's interest rates have been in a down trend. TNX could have crossed the monthly cloud bullishly on a couple of occasions but it never had the power to do what it did this month. What happens now?
Here are the times TNX could have had the strength to cross the monthly cloud bullishly but it got rejected:
Here is this months action:
Looking at it from a different angle...below is the monthly chart of ZN. When interest rates rise, ZN futures goes down. Does a 6% Interest Rate sound crazy? Don't break that neckline!
Bonds Retest LowsBonds tested relative highs with increased risk off sentiment due to Russia's attack on the Ukraine. However, after a day of stock selloff and safehaven inflows, we quickly retraced back to support at 126'11. The Kovach OBV barely budged off the rally to 127'08, where a red triangle on the KRI confirmed resistance. It has since bottomed out, confirming support at 126'11, but if we break down from here, then there is a vacuum zone down to lows at 125'17.
TNX - Daily / The Break of SymmetrySince July we began suggesting the ROC large break in early 2021 was a precursor to
a decades-long reversal in the Bond Market.
A Historic event seemingly lost on Convention.
The longer-term downtrend can easily be observed in both Weekly and Monthly
Charts - within those 2 TF's you will see the Long Term Channels UTL.
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I pay a great deal of attention to Symmetry and Time, as it is as important as Price.
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We can see in the chart above, 10 Year Yields decisively broke out as our pivot for
higher was 1.961.
Initially, it was front-run by 1 Pip during the Pre-Open - for bonds the action begins
at 8 AM EST.
The rest is history.
Extensions will trade into March IMHO.
Buyers since the FAKE 153 TOSS have been beaten down. Many are still insisting on
remaining in the Bid,
Buy the Dippers @ 153 / 151 / 149 / 147 / 143 / 142 / 139 / 136 continue to walk themselves
into continuing losses.
The Waffle House opened for Drive-Thru and the parking lot pileup ensued.
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Forward CASH is not only being discounted for 007s, but for Corporate Jumbos aka
Mega Caps.
A clear sign of Depression 10X from August 2020 - a leading indicator by 18 months
historically.
Right on TIME - March 2022.
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You cannot fix stupid you can, however - you can take it's $.
Rates will continue to persist to the Larger time frames @ 3.5%.
This is the point of truncation late this year when 5/5 concludes for the Equity Complex
at New ATHs. Even the TLT baggies will gain small relief as all JUNK is hoisted higher in
one final Tulip Phase.
A multi-year Bear Market will ensue, collaterals will be "Reset" and Bonds, as we long warned
become perpetual.
Fluidity / Mobility matter most.
Unfortunately, the vast majority will remain snared.
Bond s may bounce, yields may come downThe 10yr bond market continued to fall today as yields broke the 2% level, highest levels since 2019. The market has been laser focused on the "2%" level in recent months. If you look at the 10yr bonds futures market, the ZN, the bonds have traded down to the 61.8% Fibonacci retracement of the 2018 lows to 2020 highs. This is a key level of support longer term. The triangle pattern max target has nearly been reached too. Since this level is so big (technically) we'd assume there would be a bounce/consolidation near these levels as the bond market also completed an ab=cd pattern. If you are short bonds, You should take note. This was discussed on yesterday's "Trade Off" show hosted by Pepperstone Securities.
TNX - 10Yr Yields Sell Offers and Bond VX / Trouble
Bond Bagholders just never learn - this Secular Cult is doomed to extinction.
The two-year Treasury yield posted its biggest single-day jump since the
market volatility of March 2020.
Of course, this was after Federal Reserve Chair Jerome Powell promoted
the Policy Flip Flop that the Fed will raise rates in March, and left the screen
porch door open for a quicker than-anticipated pace of rate increases.
The Dot Plot is wiggling in excitement.
IN reality, the FED will begin to Temper expectations.
It is what they do - Lie Cheat Steal / Delay.
10 Yr Yields have seen another fantastic ROC-driven Spike which advanced
well ahead of the Pre-Spring Meltup in 2021.
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TNX will provide a very large indication as to how the preset Wedge on the ES/NQ
resolve, likely this week...
Keep it in purview at all times, sudden violent reactions are to be expected.
ZN - 10 Year Note Futures / An important ChartThe importance of ZN as an Instrument cannot be overstated.
It has been extremely technical and Reliable in assisting us in
forecasting Rate Mid Curve and provided the ROC's for TNX.
Today's MAcro Data begins with the CPI @ 8:30 AM EST using
the new Base Effect from the BLS.
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CPI is projected to be 4%.
Food prices have already increased substantially into 2022
as we indicated Mid-Q4 2021 - Pordiucer were going to begin
passing along increases at an average rate of 20-23%.
Energy continues to Rise as do Commodities, on balance, across
the Board.
M2 continues to move higher, as does the Fed's Balance Sheet.
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The reaction to the CPI this morning will provide direction for the
Indexes the balance of the week.
Pricing Power is being passed along to end-users (consumers) at
a time when the Federal Reserve is indicating they are about to begin
an aggressive reduction in Liquidity and an accelerated pace of
increases to the Fed Funds Rate.
We have seen back to back ALGO driven increases in the ES / NQ / YM
and indicated 10 Yr Yields would pullback ~ 1.81% (1.808 was close
enough).
2021/2022 measured move is now .998 to 1.808 - a near doubling of
the Mid Curve.
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The Bond "safety" Trade wasn't entirely wrong until the Curve
began to work its magic. We indicated in July Rates would begin
rising again into the end of 2021.
Where the Bond Buters lost sight of the Safety Trade was quite
simple - Convention holds only when the Yield Curve is steepening.
As YCC gave way to a FED backstop where the recycling ballooned
the Fed's Balance Sheet and Auction after failed Auctions began to
appear beginning at the long end of the Curve.
My Thesis proved 100% correct, then as now.
We anticipate a reaction to Mid Curve on today's ReCalc.
Safe Trading.
TLT - 20Yr Bond ETFThe Monthly Chart continues to expand in Range.
This is interesting as the Range Broadens the implications
are quite Dire longer term.
TLT was sold heavily prior to the ROC SPike in TNX.
ZN was sold on Volume as well, an Instrument we have repeatedly
discussed for its weakening structure.
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Attempting to apply "Convention and Rationale" to an aging Trend
is generally, an Idea whose validity should begin to come into question.
FASB 56 alone is enough to bring the operations within the Shadows of
the Bond Market under duress over time.
It is clear the BIS is backstopping this operation - at what cost, we can
only surmise.
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The Real Issue moving forward for the Bond Complex is one of simplicity.
Rates will, in the Short Ter react to Policy and the perceived threat of
Inflation.
Shadow Operations will require time to unfold, but we believe this process
has begun, it will not be brought into he light of Day any time soon, but will
eventually, appear in the form of unexplained loss of confidence around the
Globe.
This will, of course, be devastating to the US Dollar. rendering it a 50 Level
once 82 and then 77 are broken.
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The competition between China and the United States is well underway
and is accelerating on many fronts.
With the US Losing its advantages due to its inability to produce Value
across former dominant Sectors of Global Trade - a 22nd Century pivot to
Asia will continue to gain in both scope and scale, as well as velocity.
Financial Isolationism within the approaching rebalancing of Global
financial Arrangements will render the US to a weighted SDR status
with less than favorable terms and conditions.
This will have a devastating effect on the US Bond Market.
The curve will be converted to a Perpetual Duration with Principals
retired. A balance sheet liability which cannot be reduced without
far greater and far more insidious distortions.
It can never be eliminated.
Never, it is not mathematically possible. Therefore it will be erased to
bring balance. Think of it as the FDIC/SPIC coming to save $250K of your
$20 Million.
You lose, they win.
They default in an extraordinary manner and provide token assurance
that... one day... they swear to make you whole.
It will never happen.
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This is axiomatic, pure, and simple.
Regardless of the Gyrations... The Future is not "Uncertain" with respect
to Bonds and how they will be all but eliminated.