Point & Go Figure
Does this put me on the endangered species list?
After backing off last week in the wakes of hurricanes Katrina and Rita, government bond yields, looked at through the 5-, 10-, and 30-year yield indices, are again creeping higher. The five-year has formed a large triangle on a long-term 1x3 point & figure chart, while the 10-year and 30-year also have moved to critical technical inflection points.
These inflection points are going to be very important to watch over the next few weeks. For most of the past 16 months rates have remained range-bound; moves toward the top and bottom of the range have stagnated. The difference now is that the chart patterns have tightened into technical formations that typically produce meaningful breakouts (or breakdowns) when completed.
In other words, those who have grown comfortable with the range may be in for a surprise if they expect the past action to continue.
I have added text and illustrations to the charts where necessary.
All charts courtesy Dorsey, Wright & Associates.
5YR Yield Index (FVX)
The FVX chart shows how crucial the next move on the chart will be. The primary trend for this index is already positive; a move above 42 would suggest the next leg higher is underway.
10YR T-Note Index (TNX)
The TNX longer-term chart remains in a negative trend, but a move above 44 would be an important breakout; a move below 40 would suggest a new leg down is underway.
30YR Yield Index (TYX)
The TYX has been flirting with this 16-month downtrend line since August. A move above 46 would suggest the primary context has changed.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Daily Recap Newsletter