Mid Year Update – Part 1: 10 Year Rates
Mid Year Update – Part 1: 10 Year Rates
I begin each year looking at monthly perspective charts of Equity, Rates, Commodities and DXY . Those posts can be found in their entirety, with extensive fundamental support, in the links below. I will update views on the four markets over the next few weeks.
The early 2022 the conclusions were:
– Bonds: A bull market defined by a broad declining channel, but rising inflation could easily change the trend. The most likely catalyst to end keep rates below 3.25% would be a financial accident created by higher rates.
-Equities: SPX remains in a technical bull market and there are no overtly bearish behaviors evident in the longest perspectives. However short term weakness could easily morph into a bear market.
-Commodities: Goldman Sachs Commodities index is in the center of a broad 14 year range, bounded essentially by the low set during the financial crisis and the resultant 2011 high. The most notable/useful current chart feature is the clear uptrend from the 2020 pandemic low. Until that uptrend is broken, the most immediate trend is to higher price.
-US Dollar: The wide macro range, 70.70 – 121.02 has contained price action over most of my trading career but volatility is more cyclical than price. These periods of low vol. set up conditions that often lead to explosive moves.
Reminder: Bond bull and bear markets are defined by the PRICE trend. In other words, a bull market in bonds = rising bond prices and falling yields.
10 Year:
Monthly:
– In January bonds broke above the 40 year downtrend that had defined the bull market. The break of the downtrend moves the structural long term trend from bullish to neutral.
-A monthly close above the 3.25% pivot would begin to define a long term structural bear.
– Initial targets above the pivot are found at 5.29% (the 2007 pivot high) and 6.27%, (. 382 retracement of the entire bull market).
-The monthly MACD oscillator generated a long term sell signal (in December of 2020 at roughly 90 bps ). Until this sell signal resolves, place less weight on buy signals generated in lower perspective (daily and weekly) time frames.
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