Technicals on Tens


By Rom Badilla, CFA

July 9, 2012

In our last “Technicals on Tens” post, we stated that a convincing break of the 1.55-1.56% range which is the bottom end of the recent sideways symmetrical triangle that has plagued the market with indecisiveness between buyers and sellers, should lead to a continuation of the overall intermediate downward trend. With the yield of the 10-Year at 1.51% according to Trade Monster’s Bond Trading Center coupled with the MACD indicator crossing and turning negative (lower section of chart), we may see a retest of the all-time lows of 1.44%.

Keep in mind that the lower end of the Bollinger Band looms at 1.49-1.50% range which may keep the retest short-lived.

However when looking at a longer-term chart, resistance lies in the 1.36-1.37% range given the trend-line established from the lows set in June 2003 and in the December 2008.

A short-term reversal would be marked by a move past the top of the aforementioned intermediate downward March and April trend channel at around 1.66-1.67% range. The next layer of support lies at 1.80% which is the May 22high. Beyond that, the high set on May 10 of 1.92% percent would provide another layer of support. Afterwards, the market should find intermediate support in the declining 200-Day moving average which is around the 1.94% area. Farther out, medium support lingers at 2.12 to 2.17% range which is the April 6 payroll gap down open. Any flight to quality reversal due to European solution or improving U.S. economic data could lead the 10-Year to challenge recent highs of 2.39% which was set in late March 2012.

The above content is provided for educational and informational purposes only, does not constitute a recommendation to enter in any securities transactions or to engage in any of the investment strategies presented in such content, and does not represent the opinions of Bondsquawk or its employees.



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