TNX will tank again in summer Given that debt ceiling is looming after 31st July, there will no-issuance of TNX as the US govt can't issue them anymore post the debt ceiling resolution. Fed is still going to buy the T bills/bonds per their $120 billion mandate. Even if we assume demands remains, supply is dwindling -> lead to bond price increasing -> yields tanks -> TNX tank
TNX trade ideas
US Government Bonds 10YR Yeld (TXN)A policy of average inflation does not imply that there will be steeper hikes.
Three important things are to be noted, then for the other insights of a marco nature, I refer you to the analyzes included in the 30yr chart that you find just below.
The FED placebo effect of stimulus packages shows a shorter impact. Trillions of dollars spent create a small positive effect that lasts for less than three months but leaves a massive trail of debt behind. Central banks are increasingly hostage to governments that simply will not curb deficit spending and will not implement structural reforms. Market participants know this and take incremental levels of risk knowing that central banks will not taper, which leads to a more fragile environment and extreme levels of complacency.
ECB with a change in its inflation target, would allow the central bank to exceed its 2% limit without change of policy. So if the ECB lets inflation go, some interesting considerations can be made: the euro is destined to become the next "new lira". There will be no reimbursement of debt and we will have two scenarios before us, both very bad: 1) Stagflation or 2) Deflation
10 Yr Yields - Potential BreakdownStructure:
(-) In a downward channel
(-) Broke long-term uptrend
(-) Lower highs, lower lows
(-) Negative bias under 18 MA, 50 MA and 100 MA
(-) Looming "death cross" of 50 MA under the 100 MA
Indicators:
(-) Falling momentum, but oversold
Macro:
(+) Strong Dollar
(+) Fear is coming out out of the market from last FOMC
(?) Friday jobs report
Target: 200 MA @ $1.27
Bull contra case:
Yesterday's price action could be a fake out and could move higher to $1.62
Would need to break through several moving averages
Bullish divergence with slow stochs
More Upside Coming in Bond Yields?A month ago, we cited the downward-sloping channel in bond yields. Now it could be time for a move in the opposite direction, to the upside.
This weekly chart shows how 10-year Treasury yields held 1.44 percent in the week begun June 14. That was almost identical to the low in early September 2019. Yields bottomed 10-15 basis points lower July 2012 and July 2016, which suggests this price area has long-term significance.
Next, stochastics are rising from an oversold condition on the weekly chart.
There’s also an inverted hammer (potential upside reversal pattern) on that same candle three weeks ago.
In addition, the iShares 20+ Year Treasury Bond ETF has a bearish kicker pattern on its daily chart on June 18 and 21. TLT isn’t exactly the inverse of TNX because it holds longer-dated Treasuries. However, it’s a useful (and heavily traded) ETF tracking the price action in the fixed-income market:
Crude oil could be another important chart because it just had its highest weekly close in 2-1/2 years. Higher oil prices generally drag yields upward as well.
Taking a step back, we could be at a pivotal time for bonds because GDP growth remains close to 10 percent and inflation is near long-term highs. Tight inventories across the economy could result in more upward price pressures. There are other incremental upside risks, like the economic reopening, increased hiring and government stimulus. All those forces together could maintain an upward pressure on yields.
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The end game is inflation, but the path is unclear.Currently, I think we are in the final stages of this corrective phase. The yield objective is based on the Fibonacci retracements from the second wave, expressly, by the 0.382 to the 0.618 levels.
Detailed decomposition of the current correction in the following picture:
If this labeling is correct, inflation expectations may increase during the rest of the year. Although the title of the publication says long on TNX, the reality is that bonds will lower their prices. Therefore, investors and traders may add risk to their portfolios to hedge their purchasing power (e.g., gold, financial stocks, value-based ETFs, Bitcoin, etc.). Analogous the analysis for yields going down (Government Bonds, Investment-grade corporate bonds, etc.).
TNX has a bearish look..butTNX has been rolling over of late and so far has not reacted strongly to today CPI and jobs data. However price remains above the 382 and the green box on the chart. The longer price stays above that level the higher the odds yields venture up to the 618 level taking the yield up to 2.17. Something to keep and eye on.
Interest Rates Lower: Disinflationary or not?The 10-year is dropping. That wouldn't naturally combat inflation, so shouldn't it fuel the fire instead? More inflation means cheaper dollars. Cheaper dollars means more expensive stocks, so in general, if TNX is going down, shouldn't SPX be heading higher soon?
Bond Yields Are Trending LowerThe first quarter’s dramatic surge in bond yields had a big impact on the market, shifting money from growth stocks to value plays. However there are growing signs of this trend reversing.
The chart of 10-year Treasury yields shows how a channel has formed since late March. If it continues in its current trajectory, yields could go back toward 1.40%.
Overall this isn’t a huge surprise considering the economic data, which has worsened considerably this month. We started with weak job growth, then saw poor retail sales followed by a major slowdown in housing. Consumer sentiment and confidence both missed estimates.
The market has priced a lot of good news into bonds, and now it’s not entirely panning out. Fed officials are still mostly dovish. The result could be lower bond yields and a shift away from value. That could be good news for big tech stocks and the Nasdaq.
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Overall View for the Growth StocksMost of us know that we are getting battered due to inflation concerns and rising 10 year treasure yields. From this chat we can see our pain will continue for most of the Q3 and somewhere in Q4, i expect this to end. Nasdaq will keep reacting to the fluctuations in this and will correct heavily (~11,000 range) once we are in the Wave 5 for TNX.
Once we reach the end of the Wave 5 in TNX, we will have a considerable drop in this and our Growth stocks will see new signs of life.
I will try to trade the short term trend, than initiating longs at this time.
Stocks To Watch This WeekThe Market keeps grinding sideways with the longer term uptrend still intact, many growth names remain choppy. These names have shown good relative strength and accumulation volume and most are in the growth sector. This may give good risk/reward entries on some of the best names. Some of these charts still need to confirm their price action. This video is my watchlist. Most of these names are at or near all time highs or multi year highs. There are 28 total stocks on this list. I add an additional 5 stocks that are on my potential short squeeze watch list. Many of these have IPO'd in the last few years and still have a growth story ahead of them. Know your time frame and risk tolerance. Know your earnings dates! I go through these quickly so grab a pencil and paper and jot down the names that look interesting to you and then make the trade your own. Good Luck!
10-yr Treasury Yield: Elliott AnalysisIt’s possible the 10-yr treasury yield could settle down lower to Resistance Level 1 (1.40-ish) to complete Wave-C.
Then from there the Yield could continue higher (yellow) or do a double-correction (red) to Resistance Level 2 (1.19-ish).
Tagged SHORT for the expected short-term price action lower.
If your already in a trade, TRADE YOUR PLAN.