Inflection Point – 30Yr Bonds?

BarroMetrics Views: Inflection Point – 30Yr Bonds?

The 30-Years seem to be approaching a resolution point after spending most of 2014 rallying from the low made on December 27.

I had been looking for any rally to hold below the 55% retracement area of the down move from 149’04 to 127’23. Figure 1 shows the area I mean. When the bonds reacted off the 138’14, the question was whether it had completed the rally.¬† I took the view that we’d see more upside. This week’s price action suggests I was spot on.

Figure 2 shows the 18-day swing and the price action around the breakout. We see that the retest¬† occurred on the 13th bar. This suggested that the Primary Sell Zone (134.55) should hold. It did. Figure 2 shows a close up of the retest. We see that on last rotation down, the 30-yrs breached prior lows and bounced. This suggests we’ll see a break above 138.15. I’d like to see the market do that and then either convincingly clear 140.50 or provide a bearish conviction close below 137.37. The former suggests more upside and a retest of 149.125; the latter suggests a retest of 128.75.

Remember that future prices are inverse to cash. Hence a move to 149.125 means lower rates; a move to 128.75 means higher rates.

Of the two scenarios, I believe the latter the more likely.

That would prove interesting. If I am correct that Nov 2014 to March 2014 will mark a top in US stocks, rates moving higher will provide important confirming info.

13-w-30yr.png

FIGURE 1 Weekly Bonds

18d-01-30yr.png

FIGURE 2 18-day Bonds

18d-02-30yr.png

FIGURE 3 18-day Bonds

Leave a Reply

Your email address will not be published. Required fields are marked *