I’ve been watching the herds to try to determine just when the interest rate topic among the best and brightest (as chosen by the media) would start to pivot from ‘rising rates!’ hysterics that have been locked and loaded in the public psyche since the US election to a sort of ‘rut roh, maybe we got played again… ‘ realization that Rome – and a Great America – are not built in a day.
What I am trying to say is that after the previous media headlines last summer (mainstream media: NIRP & BREXIT!!… everybody into risk ‘off’ bonds!) yields reacted a bit and rose as they should have, from a contrary setup, in order to catch the herds off sides.
But then the hysteria over the Trump election led to the Druck’n Suck-In of the true believers (or “Sons of Druckenmiller”) and… here we are with everybody anti-bonds, pro-reflation and pro-interest rates. Maybe they would be right this time, but then again, given the herd’s history (from Sentimentrader w/ my markups)…
Yesterday was clearly a good day to introduce my new Jack in the Box continuation/flag pattern. The double bottom broke down slightly and has then reversed back into a full test of 2299.40. The full ATH retest at 2300.99 is VERY close and should be tested today if we are going to see that full retest. SPX 60min chart:
My intermediate and longer term technical set-up work on 10-year US Treasury yield argues that benchmark yield is in transition from a 35-year bear Market (dominant downtrend) into a multi-year bull market (dominant uptrend).
From 1981, when 10-year yield peaked at 15.84% amid concerns about rampant, uncontainable inflation and stagnant growth (“stagflation”) precipitated initially by the 1973 OPEC oil embargo, benchmark yield steadily and relentlessly declined to a post-financial-crisis 2016 low at 1.32% (see Charts 1 and 2).
From a technical perspective, I can make the case that all of the action in yield from mid-2011 into early 2017—a 5-1/2 year period– represents a major base formation at the conclusion of a generational yield bear market (see shaded area on Chart 1). That said, to confirm the end of the 5-1/2 year transition from bear to bull market, yield must climb and sustain above significant resistance lodged between 2.75% and 3.30%. Yield currently is circling 2.50%.