30-Year Bond Update

 BarroMetrics Views: 30-Year Bond Update

In “History Rhymes“, I postulated that one event that may change the sentiment in the S&P would be: a directional move down in 30-year Bond Prices (i.e. yields up). I also suggested how such a down move may develop.

Last week, we saw what may be the start of the scenario.

Figure 1 is a Daily chart (E-Signal Nearest Future Month Continuation). We see:

  1. Strong Average 5-day Swing Volume in the previous upmove with little upside ground to show for the effort.
  2. This price-volume price action was even more bearish because it came off a potential Negative Development buy signal. The buy setup occurred when at B, we saw a breach of the previous low at A and then we saw re-entry above the Primary Buy Zone. Normally we’d expect to see strong upward momentum off this setup rather than the anemic up move that followed.
  3. Friday’s bar showed a directional day down on strong volume.

The question now arises what price action would constitute a sell signal?

The more important price level is the Maximum Extension at 142’22; acceptance below the Maximum Extension (Figure 2) confirms the 18-day swing Normal Change In Trend .

However if there is acceptance below 143’10, I’d be a willing seller. Figure 3 shows my reasoning. The last Initial Price Movement began from 135’05 and ended at 153’11. Acceptance below 143’10 suggests a mid-point break setup that normally brings prices down to the Primary Buy Zone at 137’16 to 135’05. In short. with acceptance below 143’10,  we should see acceptance below 142’22.

If the above scenario proves correct, the question that is then raised: have we seen a breakdown in the S&P bullish sentiment?

That will depend on the price action of the S&P at the time of the Bond breakdown:

  • I would say ‘yes, the bullish sentiment is broken’, if at the time of the Bond break, the S&P is heading South.

  • If the S&P is heading North at the time of the Bond break, the jury would still be out on this question.


FIGURE 1 Daily chart (E-Signal Nearest Future Month Continuation)


FIGURE 2  Daily Chart 18-Da Swing Maximum Extension


FIGURE 3  Weekly Chart Mid-Point

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