Posted on Aug 03, 2023, 08:40 by Dave Toth
Today’s clear break above 07-Jul’s 4.07% yield reinstates and reaffirms our count calling for higher rates discussed in 19-May’s Technical Blog and leaves only 24Oct22’s 4.251% high as the last hurdle ahead of a resumption of the secular move higher in rates. The extreme upper recesses of the past NINE-MONTH range presents a potentially precarious situation where even a smaller-degree bearish divergence in momentum could result in a steep, if intra-range relapse. But as a result of today’s resumption of what is now a FOUR-MONTH uptrend in 10-yr rates, the daily log close-only chart below shows that 19-Jul’s 3.752% low is the latest key corrective low this market is now required to fail below to defer or derail the resumption of the secular move higher in rates to new highs above 4.25%. We will identify a tighter bear risk parameter in the contract below.
The weekly log close-only chart of 10-yr yields below shows the magnitude of the secular move higher in rates from Jul’20’s 0.527% all-time low where Oct’22 – Mar’23’s clear 3-wave and shallow setback easily characterizes a (prospective) 4th-Wave correction ahead of a (5th-Wave) resumption of the massive uptrend in rates. To peak this market out on a broader scale, commensurately larger-degree weakness in rates below 24-Mar’s 3.3715 larger-degree corrective low and key long-term risk parameter remains required. IN lieu of weakness below at least 19-Jul’s 3.752% corrective low cited above, a resumption of the major uptrend in rates to new highs above 4.25% should not surprise.
The 240-min (above) and daily (below) charts of the contract show the clear and present downtrend that’s on the cusp of breaking 06-Jul’s 110.05 low, leaving only 21Oct22’s 108.265 low as the last bastion of prospective support for the secular bear market from Aug’20’s 140.13 all-time high. More importantly, these charts show smaller- and larger-degree corrective highs at 111.21 and 113.08 that this market is now required to recoup to threaten and then negate a more immediate and potentially broader bearish count. Per such, these levels serve as our new short- and long-term parameters from which the risk of a still-advised bearish policy and exposure can be objectively rebased and managed by short- and longer-term players, respectively. Until and unless this market recoups at least 111.21, we anticipate a break of 06-Jul’s 110.05 low that will then set this market’s crosshairs on last Oct’s 108.26 low and the resumption of a THREE-YEAR secular bear market.
The weekly chart below shows the magnitude of the secular bear market from Aug’20’s 140.13 all-time high where, given the extent of the past four months’ relapse, Oct’22 – Apr’23’s recovery attempt easily fits the bill as a correction within the ongoing major bear to at least one more round of new lows below Oct’s 108.26 low. These issues considered, a bearish policy and exposure remain advised with a recovery above at least 111.21 require for shorter-term traders to move to the sidelines and for longer-term institutional players to pare bearish exposure. In lieu of such strength, further and possibly steep losses should not surprise.
