On September 6, with the ProShares UltraShort 20+ Year Treasury (TBT) reaching a new low (33.32) in its 7-month corrective process, we noted that "Dec-Sep correction could be at or nearing a downside exhaustion."

Our RSI and MACD indicators showed a glaring non-confirmation of the low -- and sure enough after the TBT dipped to a new low of 32.99 the next day, it went on to rally over the next four sessions, and reached a high of 35.25 this past Wednesday.

On that same day, Wed Sep 20, the Federal Open Market Committee said it will keep the federal funds rate in a range of 1-1.25%, but Fed officials intimated that they may raise rates one more time by year-end, and three times during 2018, in addition to starting Quantitative Tightening in October-- the slow, steady reduction of its bloated $4.5 trillion balance sheet.

With the Fed intending to normalize monetary policy after years of "easy money," 10-Year Yield has been in a 14-month budding bull market (which is bullish for the TBT).

The bull market in yield began with the July 2016 low of 1.32%, which ended the 35-year bear market.

As long as any forthcoming weakness in yield preserves 2.03%, my preferred scenario calls for buying pullbacks in the 2.16%- 2.12% support zone (if able) ahead of a powerful next upleg.

What exactly could or will be the catalyst for the emergence of the next powerful upleg in yield is anyone's guess, from a sudden surge in latent inflation precipitated by a resumption of acute US Dollar weakness, to a surprising passage of stimulus and tax reduction legislation that elevates growth and inflationary expectations, to a loss of bond investor confidence in the efficacy of the Trump Administration.

Whatever the supposed reasons, all eyes on two yield levels: the recent low-zone at 2.10%-2.04%, and key resistance at 2.37%-2.40%, which if (when?) taken out, will trigger new, powerful buy signals for both yield and the TBT.

See charts illustrating the technical pattern on the TBT and Yield.

Mike Paulenoff is a veteran technical strategist and financial author, and host of MPTrader.com, a live trading room of his market analysis and stock trading alerts.
Sign Up for a Free 15-Day Trial to Mike's Live Trading Room!

© 2002-2017 MPTrader.com, an AdviceTrade publication. All rights reserved. Any publication, distribution, retransmission or reproduction of information or data contained on this Web site without written consent from MPTrader is prohibited. See our disclaimer.

Mike Paulenoff Archive

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

The Market Oracle is a FREE Financial Markets Forecasting & Analysis web-site.
(c) 2005-2024 MarketOracle.co.uk (Market Oracle Ltd) - Market Oracle Ltd asserts copyright on all articles authored by our editorial team and all comments posted. Any and all information provided within the web-site, is for general information purposes only and Market Oracle Ltd do not warrant the accuracy, timeliness or suitability of any information provided on this site. nor is or shall be deemed to constitute, financial or any other advice or recommendation by us. and are also not meant to be investment advice or solicitation or recommendation to establish market positions. We do not give investment advice and our comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to enter into a market position either stock, option, futures contract, bonds, commodity or any other financial instrument at any time. We recommend that independent professional advice is obtained before you make any investment or trading decisions. By using this site you agree to this sites Terms of Use. From time to time we promote or endorse certain products / services that we believe are worthy of your time and attention. In return for that endorsement and only in the cases where you purchase directly though us may we be compensated by the producers of those products.