Monday, 23 April 2018

Bond Market: The End of Bull Run is Neigh ?

Clearly, the bond market is in the important crossroad right now.

Ten year treasury note monthly chart from 1983 to 2018
Ten Year T Note Monthly Chart from early 1980s until today 2018
(Click chart to enlarge)

While the chart shows that every time TNX gets to the top of this 3 decades parallel falling channel, RSI reaches overbought level in the MONTHLY chart, and TNX pulls back, EVERY TIME.

Seems like this time is different. I know, this is a famous last words. I must justify this.

Here are the 5 technical reasons i can see from the chart:
1.  We have a double tops in 2006 – 2007, but there’s bearish divergence in RSI (or other oscillators). This time the double tops spans longer period (from 2014 to 2018), and we have bullish divergence in RSI (or other oscillators).
2.  Also, underneath these double tops is clearly an IHS pattern.
3.  Unlike all the peaks of previous monthly RSI, which are all inverted ‘V’. This RSI has a reversal near its top, trying to make new high.
4.  TNX has been basing practically for 7 years.
5.  For more than 3 decades, the bond is in the bull market. All good (or bad) thing must come to an end. It would make sense the bull market ends now. If TNX breaks out in the previous top that kissed the upper channel, then TNX will break out of 5+% yield. This is a high number. Breaking out right now only requires the yield to go above 3%.