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.
FIGURE 1 Weekly Bonds
FIGURE 2 18-day Bonds
FIGURE 3 18-day Bonds