My near and intermediate-term technical work on the 10-year yield is warning me that the correction in yield off of the Feb 9 high at 3.74% is nearing completion ahead of the initiation of a new, powerful upleg.

Let's notice that all of the action during the past two weeks has carved out a "falling wedge" formation within the lower portion of the larger, corrective pattern that has dominated the price action since early February.

The falling wedge formation usually represents a consolidation prior to one final price plunge that concludes the corrective period (in this case, from the Feb 9 high).

Right now, I am expecting one more bout of weakness that presses yield to 3.03% before its reverses to the upside in a big way. It is with the foregoing in mind that we are bullish the ProShares UltraShort 20+ Year Treasury ETF (TBT).

By Mike Paulenoff

Mike Paulenoff is author of MPTrader.com (www.mptrader.com), a real-time diary of his technical analysis and trading alerts on ETFs covering metals, energy, equity indices, currencies, Treasuries, and specific industries and international regions.

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Comments

matthew
26 May 11, 11:42

ideas?

the technical data that i am witnessing is also suggesting a spike in rates. can someone please explain however, how a downdraft in stocks will accomplish this as we enter weak market seasonals which is further complicated by the removal of QE2? i would expect a decline in rates as money moves into bonds out of stocks.

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