TNX Declining. Another Confirmation of the SPX Sell Signal

By: Anthony_Cherniawski

Good Morning!

The SPX Premarket is down enough to suggest that the descending trendline of the Orthodox Broadening Top is being triggered this morning.

Remember, both the VIX and Hi-Lo gave us a confirmed sell signal last Friday. This signal suggests the SPX may decline beneath 1600, as suggested by the Megaphone formation, by the end of the month. However, the ride will be bumpy on the way.

The elapsed time from the June 20 high to the June 3 high is exactly 8.6 days. This next decline may be longer and deeper, since it is a Wave [iii].

The next decline may take 10.75 days, going to the close of trading on June 16. Then a very swift retracement rally to Friday, June 19, encompassing 12.9 days total.

TNX has made its initial declining impulse and retracement back to Cycle top resistance. It appears to be capable of resuming its decline, confirming the flow (out of stocks) into bonds. The Broadening Wedge formation is giving us a possible target for the decline. That is a pretty healthy 27% from this morning’s level.

Bloomberg reports, “If the Federal Reserve is really so intent on raising interest rates this year, why is Wall Street chopping its forecasts for bond yields?

For all the hand-wringing over the recent selloff that wiped out about $1.2 trillion in value from the global bond market, the fixed-income market’s best and brightest have actually taken down their year-end estimates for Treasuries in four of the past five months.

It amounts to a dangerous game of chicken, in which many analysts and investors are betting the Fed won’t lift rates too fast because of the damage it may inflict on the economy -- even after last week’s stronger-than-expected jobs report. And the stakes have never been higher for holders of debt globally, who are more exposed to the potential for big losses than at any time in history, based on a metric known as duration.”

To make matters worse, the DOJ is launching a probe on Treasury market manipulation. This will likely add to the volatility in bonds.

Regards,

Tony

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