Last September, we showed the support area where we expected long-term yields to begin a possible reversal. Soon afterward, the index rallied from the zone and broke through initial resistance, but it has spent most of 2017 until now in a corrective retracement. Now it appears that rates may be ready to begin advancing again.
The Treasury 30-year Yield Index (TYX) showed that it could overcome the first resistance zone in November, but it’s encounter with the trend line connecting the index highs in 2011 and 2014 has sent it retreating back to the Fibonacci 38.2% retrace level at 27.90. There was a brief poke beneath that level, but the index managed a monthly close above it.
If TYX is able to move beyond trend line resistance, then it might be able to challenge the upper edge of the channel, which would be near 33.60 at the end of this year. A long-term positive divergence on the commodity channel index momentum indicator favors the prospect of some upward movement, even though the dominant 41-month cycle is nearing a crest.
On the other hand, if TYX puts in a monthly close beneath 27.90, then the next lower Fibonacci retracement level at 25.27 could be tested.
When TYX made its brief poke beneath the first main Fibonacci retracement level in late June, as shown on the monthly chart above, the momentum indicator on the weekly chart below quickly reached oversold levels and precipitated a fairly strong bounce.
If the index can overcome nearby Gann-related resistance at 28.96 and also the trendline mentioned earlier, then another Gann-related level at 34.16 becomes attractive. That might represent the first resistance that TYX encounters after it breaks above the channel boundary shown on the monthly chart.
There are a lot of good trades to catch this summer. Keep up with the turns by following us on Twitter @TradingOnMark and on facebook.