Fixed Income Markets, Technicals

Slide In T-Note Accelerates, Other Treasuries Ease Up On Momentum

Treasury Note (10-Year)

Short-term Technical Outlook

The 10-year treasury has experienced extraordinary pressure over the past week. An initial observance of the mid-point of the June 2007 to December 2008 rally was unceremoniously erased in a third consecutive weekly plunge. Considering the character of last week’s candle, follow through looks to be a major threat; but momentum is far from certain. What is definite though is the relative weak influence support there is around 114-10/28. The rising trendline that began back in June is unsubstantiated and the 61.8% Fib of the same bull wave is otherwise unconfirmed.
 

Long-term Technical Outlook

The 10 year is holding above the 400 week SMA (save for a few days last week) and the series of lower lows and lower highs since early 2006 is intact so there is no reason to alter the bullish outlook.  Favor the upside and anticipate a record high.
 

UK Gilt (10-Year)

Short-term Technical Outlook

The 10-year Gilt has been one of the few government securities that has held back from developing its bearish intentions. However, this past week, an otherwise uneventful drop below 118.00 has led the benchmark one step closer to a more pervasive reversal. The aforementioned level has stood as a pivot for the whole year; the wide-range bar closed the week has clear this hurdle. What’s more, with this decline; we have confirmed and developed follow through on the break of the rising trendline going back to back to June 2008 lows. However, we still have not exercised the head-and-shoulders pattern that has been developing for this market for nearly 8 months now. We will monitor the 116.80 level as the neckline on this formation. 
 

Long-term Technical Outlook

Gilt wave structure is clear.  There are 3 waves complete at the 2008 high.  An unorthodox top was made in 2009 in what is probably wave b of a triangle.  If indeed a triangle is unfolding, then wave c completed last week and waves d and e should unfold over the next month + before a thrust higher completes the entire rally from the 2007 low. 
 
 
German Bund (10-Year)

Short-term Technical Outlook

Through the second half of last week, the Bund’s decline gained momentum. After taking out the 50-week SMA and pushing the boundary of a falling trend channel; the market is now taking a break at 118.00/25. This zone is held up by a 50% Fib retracement of the July to March bull wave and the general marker of the March 2008 swing high. Another sharp decline (like the kind we have been seeing regularly interspersed with congestion over the past three or four months could quickly take us to new lows. Vigilance is essential.
 
Long-term Technical Outlook

The Bund is similar to the gilt in that I anticipate a new high in a 5th wave within the 5 wave advance from the 2008 low.  Wave 4 may be complete at last week’s low. 
 

Japanese Government Bond (10-Year)

Short-term Technical Outlook

As it usually does with the Japanese Government Bond, congestion has grown messy. The tight congestion zone between 136.60/20 did not last long at all; but the ultimate break would not come equipped with anything resembling follow through. The jump back above the former support at 136.60 has invalidated this level as a meaningful technical definer; but larger figures are still in place. The long-term 50% fib is still in place at 61.8% below and there is plenty of chop above to slow rallies. 

Long-term Technical Outlook

Commentary has not changed in months…”a 10 year head and shoulders top may be in the works and 142 should remain intact (if the pattern is to play out) as the right shoulder of the formation.  A break below the neckline would likely see a breakdown that carries into long term support levels of 122.50 and 116.41/117.20.”  This is one of the best trade opportunities of the next year +.

 

 

Written by: John Kicklighter and Jamie Saettele, Strategists for CFDTrading.com
Questions? Comments? You can send them to jkicklighter@cfdtrading.com