Looking at Bond Yields

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Yesterday was another day just chopping around while we wait for this consolidation to finish. We have been seeing higher highs and lows, which seems bullish until you remember that a typical bear flag forms against the trend, and trends sideways to up. Both SPX and NDX have been doing that under their respective 50 hour MAs and until the break back up over those my working assumption is that we have been watching bear flags forming.There is a decent chance that we will see a break either way today from this consolidation. SPX 60min chart:

140616-C SPX 60min Rising Wedge and Bear Flag

There’s really not much else to say on equities today so I’m going to look at other things. Firstly on TNX I have two nested double-tops in play short term and if we see a break below 25.79 then I’d be expecting those to carry TNX down to test falling wedge support, currently in the 23.70 area. TNX 60min chart:

140617 TNX 60min Nested Double Tops

Having a look again on the big picture, that has changed slightly with the formation of the falling wedge. On a break below the wedge there would still be the original double top target in the 1.9 area, but there would also be the wedge target in the 1.7 area.

How likely is that move on bond yields? Well the setup is there and it may happen. I would note though that the current low was a marginal new low, which is often a sign of reversal, and that low was also an almost perfect 38.2% fibonacci retracement of the move up from August 2012, whereas neither 1.9 nor 1.7 come out near any fibonacci level of significance. If the May low was a serious low and TNX breaks back up to retest the 30.36 high, I would not be surprised, and that could just be the start of a very major move up in bond yields, and decline in bond prices. I’m watching what happens here with the greatest of interest. TNX daily chart:

140617 TNX Daily Patterns

CL has hit my rising channel support target that I posted on twitter on Monday. If we aren’t to see a full retest of broken resistance in the 104 area (Aug futures), then this is the obvious place to start the next leg up towards the 111/2 area. CL 60min chart:

140617 CL 60min Rising Channel

GC has also been retracing and may also be starting a new leg up. I’m watching for a break of the small declining channel to signal that the current move down has ended. GC 60min chart:

140617 GC 60min Trendlines and RSI

ES has been in a large range overnight and looks likely to gap down slightly at the time of writing. I’m looking for a break either way out of the current consolidation today and am leaning short for that break. Nothing we’re likely to see today has much longer term significance though. A break up would most likely just be setting up the second high of a double-top, and on a break down here the bears have to break back below 1900 before they begin to impress.