The news media appear to have gone ‘all-in’ hyping the supposed economic recovery.  It’s one thing for editorial-room halfwits, eggheads, Guvvamint statisticians and Obama shills to pretend the economy is in fact strengthening. But what are we to make of the bond markets, which have been acting as though they too believe that a powerful recovery has finally taken root?  Judging from the long-term T-Bond chart (see inset), that’s what has been happening.  Notice that the continuous futures contract recently generated a powerful down-leg, one that looks strong enough to keep on going. If so, yields are headed significantly higher, presumably because the economy is about to pick up speed.

Wouldn’t that kill the economically crucial housing recovery, you ask?  Indeed it would — especially considering that mortgage re-fi business virtually dried up earlier this year in the wake of a relatively modest increase in rates. For us, at least, it’s impossible to imagine a broad recovery with the housing sector hitting a wall. A new paradigm, perhaps? We’ve wondered ourselves whether, five years from now, the real economy — the one tied to job creation, capital investment and income growth — will still be a zombie even as the Dow pushes toward 40,000. As preposterous as it sounds, who can be sure?

Returning to the technical picture, March T-Bond futures, which move inversely to yields, appear bound for at least 125^07, but to as low as 114^22 if the higher number, a Hidden Pivot support, gives way. If the lower number were to be reached, 30-year yields would be above 4.5%, compared with a current 3.9%, and long-term mortgages would be well north of 5%.  Not exactly a catalyst for real estate inflation. Alternatively, the most likely place for the March T-Bond to turn higher, assuming it is about to do so, would be from exactly 127^01. That’s a Hidden Pivot support on the daily chart, and we’ve set an alert there, since a reversal from that price could be the first sign that the supposed recovery is just a statistical mirage. _____ UPDATE (January 12, 11 p.m. EST):  Friday’s ferocious rally has put this vehicle within striking distance of creating a powerful bullish impulse leg on the daily chart  — one that would put the bearish numbers given above on ice at least temporarily.  All it would take to surpass two important ‘external’ peaks on the daily chart, the higher of which lies at 131^26, is an upthrust of a little less than 1.00 point. _______ UPDATE (January 24, 10:24 p.m.):  Just a little ways to go before the futures hit the 133^00 target shown.  There should be little doubt they will get there, but bulls will subsequently need to push this vehicle through it within no more than a few days if they’re going to demonstrate bull-market staying power. _______ UPDATE (January 27, 12:01 a.m.):  Very impressive. The futures bettered our target by eight ticks a day after first touching it, implying that there’s enough buying power left to push this vehicle to the watershed high at 134^08 that was notched on October 30. I expect bulls to get past it, with bullish implications for the trend in interest rates thereafter.