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| U.S. 10-yr Yield Monthly Chart (Chart Source: Investing) |
The chart above depicts the monthly line chart of the U.S. 10-year Yield over the course of the past 30 years. It is quite evident that the benchmark Yield has been in a secular downtrend during this time period characterized by the formation of lower peaks and lower toughs.
The sequence of lower troughs, however, has broken during this decade as the lows of 2012 were successfully held in 2016. This has led to the formation of a double bottom pattern (quite evident on the monthly line chart). The recovery off these lows has lifted the Yield back towards the 30-year resistance line. In fact, the benchmark Yield has crossed the said line this month. If the Yield gives a monthly closing above the resistance line, it would be a signal that the secular downtrend has ended. That said, confirmation of the beginning of a secular up trend would come only when the sequence of lower peaks is also broken (Note: break of lower peak-lower trough sequence signals at a change in trend from down to up). It may also be observed in the above chart that the Yield has broken out of a descending triangle pattern within the larger channel. The simultaneous breakout from a smaller pattern within a larger pattern is a double confirmation that the Yield has possibly bottomed out.
The sequence of lower troughs, however, has broken during this decade as the lows of 2012 were successfully held in 2016. This has led to the formation of a double bottom pattern (quite evident on the monthly line chart). The recovery off these lows has lifted the Yield back towards the 30-year resistance line. In fact, the benchmark Yield has crossed the said line this month. If the Yield gives a monthly closing above the resistance line, it would be a signal that the secular downtrend has ended. That said, confirmation of the beginning of a secular up trend would come only when the sequence of lower peaks is also broken (Note: break of lower peak-lower trough sequence signals at a change in trend from down to up). It may also be observed in the above chart that the Yield has broken out of a descending triangle pattern within the larger channel. The simultaneous breakout from a smaller pattern within a larger pattern is a double confirmation that the Yield has possibly bottomed out.
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The chart above depicts the monthly candle chart of the U.S. 10-year Yield over the course of the past 10 years. It can be observed that the region around 2.65% has acted as a formidable resistance since the fourth quarter of 2014. At present, the benchmark Yield is testing this resistance yet again. Sustainability above 2.65% would be a bullish development and would turn the immediate trend from sideways to up. In such a case, a move higher towards 3.00-3.05% can be expected over the course of 2018, break above which would end the sequence of lower peaks and signal at the beginning of a secular uptrend.
Concluding, the secular downtrend in benchmark Yield has possibly ended. Having said that, the beginning of a secular uptrend will be confirmed only on a break above 3.00-3.05%. On an immediate basis, 2.65% is an important resistance to watch out for. Sustainability above this resistance would increase the probability of an up move towards 3.00-3.05% in 2018. On the flip side, key support is seen at the immediately preceding low around 2.00%.
you need to use log scaling
ReplyDeleteChecked the log scale too. The 30-year trend line breakout on log chart comes around 3.6%, which is too far from the current level. Meanwhile, the 10-year trend line, just as in arithmetic scale, has broken in log scale too.
DeletePRICE IS KING, this is a long term price movements ar emore resilient than our imagination. With bubbles everywhere and the world full of debt. I wdn t be betting on too much rising on meduim to long term. We are in overcapacity world economyand will be even worse after this bubbles goes epxloding in 2 or 3 years. Real negative rates will come back and What charts still tell us is that de multiyear we still don t have a highrer high and we still have a lower low. regards, tmp.
ReplyDeleteNice analysis sir! And rightly said, unless a higher high is made (break above 3.00-3.05%), overall secular downtrend will remain intact. That said, 2.65% is an important area to keep an eye on. Sustained trading above that is likely to lift the yield towards 3%.
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