Yields on the 30-year T-Bond have taken a huge leap since bottoming in July at 2.106%. They hit 3.196% on Monday, slightly breaching the red line, a midpoint Hidden Pivot resistance at 3.163%. Now, if TYX were to close for two consecutive days above the line, I’d infer that T-Bond yields are a good bet to reach 3.409% before the surge ends. Alternatively, it would take a drop below 2.917% to suggest that the rise in rates had run its course. At 3.409%, yields would be up by 62%, since summer. Presumably, that would choke off the housing market, which in turn would cause long-term rates to fall. A complex feedback loop, to be sure — especially if counteracted somewhat by a U.S. economy freed of the crushing regulatory environment that has metastasized under Obama. Since the dynamic interaction of these forces cannot be predicted with any great confidence, you can count on me to stick strictly with the charts as 2017 unfolds. My gut feeling is that interest-sensitive trading vehicles, including copper, have already discounted more inflation than is possible over the next several years. In any case, we are about to find out. _______ UPDATE (Jan 3, 10:28 p.m.): I’ve refreshed the chart to show not only that the 3.409% target for interest rates on T-Bonds is still viable, but that this vehicle is close to signaling a ‘mechanical’ buy at the green line. I am not recommending the trade, however, because the recent highs near 3.120% failed to exceed a distinctive ‘external’ peak at 3.241% that was recorded back in July 2015. This doesn’t necessarily mean that the upward correction in interest rates has run its course, but it does argue for caution in taking the other side of the bet. _______ UPDATE (Jan 5, 9:59 p.m.): The interest rate has fallen sharply in recent days, easily breaching the 2.986% target of a downtrend begun in mid-December. This strongly suggests that the 2.917% rate at which this vehicle consolidated ahead of 2016’s push to a 3.197% peak will be breached, opening a path to 2.8% or lower. _______ UPDATE (Jan 12, 10:37 a.m.): The imputed interest rate on the long bond has bounced this morning from p=2.906% precisely (A=31.29 on 1/3). A decisive breach of that midpoint Hidden Pivot would imply more slippage to 2.813%. _______ UPDATE (Jan 17, 11:17 p.m.): Friday’s hiccup has slightly lowered the downside target to 2.792% (see inset), my minimum objective for the near term if p=2.906 is decisively breached. If the target fails to engender a bounce, 2.767% would be the next stop. _______ UPDATE (Jan 19, 10:17 p.m.): Bulls have gotten second wind, turning the ratcheting downtrend of the last three weeks into a impulsive upthrust that is likely tol get legs if it can surpass the 31.29 peak from January 3.
