Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24
RECESSION When Yield Curve Uninverts - 8th Sep 24
Sentiment Speaks: Silver Is Set Up To Shine - 8th Sep 24
Precious Metals Shine in August: Gold and Silver Surge Ahead - 8th Sep 24
Gold’s Demand Comeback - 8th Sep 24
Gold’s Quick Reversal and Copper’s Major Indications - 8th Sep 24
GLOBAL WARMING Housing Market Consequences Right Now - 6th Sep 24
Crude Oil’s Sign for Gold Investors - 6th Sep 24
Stocks Face Uncertainty Following Sell-Off- 6th Sep 24
GOLD WILL CONTINUE TO OUTPERFORM MINING SHARES - 6th Sep 24
AI Stocks Portfolio and Bitcoin September 2024 - 3rd Sep 24
2024 = 1984 - AI Equals Loss of Agency - 30th Aug 24
UBI - Universal Billionaire Income - 30th Aug 24
US COUNTING DOWN TO CRISIS, CATASTROPHE AND COLLAPSE - 30th Aug 24
GBP/USD Uptrend: What’s Next for the Pair? - 30th Aug 24
The Post-2020 History of the 10-2 US Treasury Yield Curve - 30th Aug 24
Stocks Likely to Extend Consolidation: Topping Pattern Forming? - 30th Aug 24
Why Stock-Market Success Is Usually Only Temporary - 30th Aug 24
The Consequences of AI - 24th Aug 24
Can Greedy Politicians Really Stop Price Inflation With a "Price Gouging" Ban? - 24th Aug 24
Why Alien Intelligence Cannot Predict the Future - 23rd Aug 24
Stock Market Surefire Way to Go Broke - 23rd Aug 24
RIP Google Search - 23rd Aug 24
What happened to the Fed’s Gold? - 23rd Aug 24
US Dollar Reserves Have Dropped By 14 Percent Since 2002 - 23rd Aug 24
Will Electric Vehicles Be the Killer App for Silver? - 23rd Aug 24
EUR/USD Update: Strong Uptrend and Key Levels to Watch - 23rd Aug 24
Gold Mid-Tier Mining Stocks Fundamentals - 23rd Aug 24
My GCSE Exam Results Day Shock! 2024 - 23rd Aug 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The Secular Trend Change in U.S. Treasury Bonds

Interest-Rates / US Bonds Jun 15, 2009 - 11:36 AM GMT

By: Guy_Lerner

Interest-Rates

Best Financial Markets Analysis ArticleI am on record stating that yields on the 10 year Treasury bond will move higher over the next 12 months, and this will represent a secular trend change.


Figure 1 is a monthly chart of the yield on the 10 year Treasury bond (symbol: $TNX.X), and a monthly close above the prior pivot low at 3.432% yield provided the technical confirmation that yields are likely undergoing a secular trend change. In other words, the very long term trend has changed from down to up.

Figure 1. $TNX.X/ monthly

Of course, nothing grows to the sky especially if it is not in the government's best interest, so the pullback has occurred right on schedule.

So how do I know if this pullback will be "the pause that refreshes" or the start of a new down trend that will push yields back to the lows seen in December, 2008? The short answer is: I don't know, but let me put forth some clues or as I like to call them, technical sign posts that will guide our way.

First, a monthly close below our new support level of a yield of 3.432% would suggest that we will not be seeing higher yields over time, and this would basically kill my thesis that yields are undergoing a secular trend change.

Now let's look at a weekly chart of the yield on the 10 year Treasury bond. See figure 2. The pink markers over the price bars - if you squint at the graph long enough you will see them - represent negative divergence bars between a momentum oscillator that measures price and price itself. Negative divergences typically indicate slowing upside momentum with the highs and lows of the negative divergence bar acting as levels of resistance and support respectively. In other words, look for yields to remain within the range of the highs and lows of the negative divergence bar.

Figure 2. $TNX.X/ weekly (1985 to present)

The indicator in the lower panel of figure 2 actually counts the number of negative divergence bars occurring over a 13 week look back period. What we see from the indicator is that there have been 3 negative divergence bars over the past 13 weeks, and this is noted when the indicator moves above the pink horizontal line. As we can see from the chart which goes back to 1985, 3 negative divergence bars over a 13 week period for the most part marked a high in yields that led to new secular lows. This is the strength of a 25 year bull market in bonds.

Now look at figure 3, a weekly chart of the yield on the 10 year Treasury bond capturing the period from 1962 to 1987; the two occurrences of multiple negative divergence bars actually led to a period of consolidation in yields and led to much higher yields once yields broke above the negative divergence bars. This is the strength of a 20 year bear market in bonds.

Figure 3. $TNX.X/ weekly (1962 to 1987)

So what is our conclusion? If this is going to be a secular bear market for bonds (i.e., higher yields), then two things need to happen: 1) the current multiple negative divergences will lead to a period of consolidation; 2) yields must remain above support at 3.432% on a monthly closing basis.

By Guy Lerner

http://thetechnicaltakedotcom.blogspot.com/

Guy M. Lerner, MD is the founder of ARL Advisers, LLC and managing partner of ARL Investment Partners, L.P. Dr. Lerner utilizes a research driven approach to determine those factors which lead to sustainable moves in the markets. He has developed many proprietary tools and trading models in his quest to outperform. Over the past four years, Lerner has shared his innovative approach with the readers of RealMoney.com and TheStreet.com as a featured columnist. He has been a regular guest on the Money Man Radio Show, DEX-TV, routinely published in the some of the most widely-read financial publications and has been a marquee speaker at financial seminars around the world.

© 2009 Copyright Guy Lerner - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Guy Lerner Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in