10-Year Treasury Notes ($UST Price)

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Edmund Harmon
5 years ago
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1 Weekly Inter-market Technical Report 10-Year Treasury Notes ($UST Price) Monthly Continuing from last week's report, bonds (notes) appear to be on a strong buy signal on the monthly chart, as price

8% Fibonacci). Price formed a bullish hammer/reversal candle last month which - until price closes beneath $114 - is the dominant pattern.

1 1 Weekly Inter-market Technical Report 10-Year Treasury Notes ($UST Price) Monthly Continuing from last week's report, bonds (notes) appear to be on a strong buy signal on the monthly chart, as price is in a confirmed uptrend (higher highs/lows as well as positive EMA structure) and is currently inflecting strongly off the $113 level which represents confluence support (50 EMA and 61.8% Fibonacci). Price formed a bullish hammer/reversal candle last month which - until price closes beneath $114 - is the dominant pattern. The level to watch (stops) on the downside for longer term traders is the $114 confluence level, but the structure points to higher prices likely being ahead which - should the Stock Market continue its down-slide - could take prices up to retest the $127 level over the next few months or into

2 2 Weekly With the monthly chart looking strong for bonds, the Weekly Chart temporarily tells an opposing picture. We see the same Fibonacci support line (in more detail) and note that price did inflect strongly over the last five weeks off this critical level but we're running into a little trouble at the $119 level ($ to be exact). This is the exact point where the 20 EMA ($119.30) and the 50 EMA ($119.25) are crossing over bearishly at the same price. I call this the "Cradle" since price is often pulled to this level like a magnet which serves as overhead confluence resistance. We could get either a slight retracement down from this level short-term or a resumption of the short-term down-trend that has formed on the weekly chart. Keep in mind that - from the December 2008 highs - price has made a lower low and a lower high, officially confirming a trend reversal down, and the EMA structure is setting up a bearish sell signal here. These are cross-currents bond/note buyers are going to have to overcome... and although we might get some downswing from here, I am of the camp that they can break through this level - but that's mainly based on the intermarket analysis (and bias) that the S&P 500 weakens further from here. If the S&P 500 happens to find support off its 875 neckline and rally from here, Bonds/Notes will fall in value - so to know the next move in fixed income, pay close attention to the resolution of the S&P

3 Daily The Daily Chart is showing slight bullishness, though the trend is still down (price high/low and the EMA structure... which is in the most bearish orientation possible).

3 3 Daily The Daily Chart is showing slight bullishness, though the trend is still down (price high/low and the EMA structure... which is in the most bearish orientation possible). We have formed a positive momentum divergence off the June lows, and momentum (black line) has crested to a high ($1) not seen since March. The red line (trend) also crossed $0 which is a bullish crossover - the signal from momentum is that of underlying bullishness. Price has also crested above the 50 EMA and above the $117 June highs so this - along with positive momentum - could be a sign of higher prices yet to come. I've labeled $ as a 'magnet' target or price target based on the convergence of the 200 day SMA with the 38.2% Fibonacci relationship. While the monthly chart is bullish along with the daily chart, I'd like to see price crest above weekly EMA 'cradle' resistance at $ before getting aggressively long... and again this is mainly predicated on the resolution of the Stock Market pattern seen below. 3

4 US S&P 500 ($SPX) Monthly I'm still keeping the same long-term view of the S&P as I've had in the prior updates. That we're in Cycle Wave C and are most likely entering Primary Wave 5 of Cycle C.

4 4 US S&P 500 ($SPX) Monthly I'm still keeping the same long-term view of the S&P as I've had in the prior updates. That we're in Cycle Wave C and are most likely entering Primary Wave 5 of Cycle C. The minimum long-term target is a retest of the 666 lows, though other price projections take us to $625 or even as low as $ but we'll continue to monitor those as price gives us more data. Structurally, we're in a clear downtrend and price has retraced to the 38.2% Fibonacci retracement off the May 2008 highs. Price has formed a Doji at this level (highlighted) which could also be interpreted as an "Evening Doji Star" which is quite bearish. The 40% rally from the March lows experienced a negative volume divergence and has the 'feel' of a bear market rally (unless we break above 1,000). Any bearishness will be rejected with a clean close above 1,000, but for now with the information we have at this time, the chart is cleanly indicating a sell signal is in play for the monthly S&P

5 5 Weekly Zooming in, we see what I consider to be the primary Elliott Wave count for the weekly S&P 500. In addition to hitting the 38.2% Fibonacci resistance level, price came just shy of testing the falling 50 week EMA which now sits at 950. We see a negative volume and momentum divergence coming into confluence resistance, giving us a high-confidence sell-signal again with the minimum target being a retest of the 666 lows. This view would be threatened with a close above 950 and invalidated with a close above 1,050. 5

6 6 Daily: Zooming in, we see the infamous "Head and Shoulders" pattern which has even made its way onto discussions on CNBC. With so many people watching this, contrarians are expecting the 'all too clear' pattern to fail and confuse the majority who believe it will happen. Other experts have commented that this pattern is not 'symmetrical enough.' The main take-away is that you should not see a pattern in isolation and enter an aggressive position because of it or believe with absolute certainty that it will work. Structurally, there is a clean negative volume divergence, clean "Three Push" negative momentum divergence, and Market Internal (McClellan Oscillator, etc) divergences. The technical structure is virtually overwhelmingly calling for lower prices yet to come. But in the short term, we could get a bounce off the 875 level. First, there is a rare "Tri-Star" doji (three dojis in a row) which is associated with price reversals. Second, the 875 level is HUGE - very critical for bulls to hold... also the "last line in the sand." If bulls lose this level, then it will be clear that odds overwhelmingly favor downward prices yet to come which could create a self-fulfilling prophecy of 'positive feedback' where long stop-losses are triggered and professional traders position aggressively short. Wait for a confirmed break to get short which could happen next week (which is the dominant expectation) but DO NOT get upset if bulls do manage to force a bounce/rally off this level -my guess is that they'll do whatever it takes to hold this level and the contrarian in me is indeed expecting a bounce. 6

$We could be getting ready for a fractal "Wave 4" Rally (seen on the 30-min chart) - notice the positive$ divergence that's formed.

7 7 This chart shows us looking 'inside' the intraday structure. We could be getting ready for a fractal "Wave 4" Rally (seen on the 30-min chart) - notice the positive divergence that's formed. However, the larger structure (60-min) does yield itself to a more bearish "rounded reversal" pattern... and momentum has been concentrated on the downside ever since late May. Short-term bounce - intermediate/long term bearish. 7

8 Gold Monthly I wanted to take a moment to go back as far as StockCharts.com would allow (1980) and show the technical picture (on a logarithmic/percentage) chart of Gold.

8 8 Gold Monthly I wanted to take a moment to go back as far as StockCharts.com would allow (1980) and show the technical picture (on a logarithmic/percentage) chart of Gold. Using this, we see a long-term downtrend which was reversed with a 'rounded arc' that completed in Price has experienced three clean waves (drawn) up which has terminated so far at the $1,000 level. This leads me to believe that a corrective phase is in place long-term technically, and that we have already experienced the "A" Wave Down, most likely have experienced the "B" Wave up, and could be getting ready for a "C" Wave down perhaps back to the $700 level. This view takes an Elliott and technical Purism approach, and should be supplemented with your own interpretation of fundamentals/news/inflation, etc (the common thought is that gold is about to soar past $1,000 due to inflation thanks to the US Government's bail-out/spending plans). This view is in line with this chart, in the event that price does make a "C" Wave correction down over the next few months. Price would then be set for a massive rally... but only after a correction took place to build the base for the large rise that could be yet to come in 2010, 2011 or thereabouts. A close above $1,000 would call this count into question and call for higher prices. 8

$It's possible that Gold has completed its 5-wave move into the $1,000 area in early 2008 and a sharp A-wave decline (3- wave fractal) has completed itself into the support of the 50 month EMA and$

9 9 I'm zooming in (arithmetic) to see the count from The rounded arc completed which set the stage for the recent strong rise. It's possible that Gold has completed its 5-wave move into the $1,000 area in early 2008 and a sharp A-wave decline (3- wave fractal) has completed itself into the support of the 50 month EMA and that a "B" Wave rally has also completed (or is completing) into the 2009 highs. I struggle to accept this count, as I am one who does believe inflation will be a major concern soon, and that gold will reach much higher levels at that time, but for now, the Elliott structure seems to be hinting that we need one more down-swing perhaps to $700 before this hyper-inflation call can take place. Notice the significant negative momentum divergence that formed into the 2009 price highs - that's a strong nonconfirmation of the "B" Wave and is a pattern that's often seen in corrective waves that hint a strong down-thrust is yet to come. This view would be confirmed with a close beneath $850 (20 EMA) and would of course be invalidated with a close strongly above $1,000. 9

10 10 Weekly On the weekly frame, we see a dominant Fibonacci grid drawn and that the next support lies at $850. Current support rests at $900,and a close beneath $900 would trigger a 'magnet trade' to a minimum target of $850. We are currently resting between the 20 and 50 week EMA (the fact that price broke the 20 week EMA is bearish), and it seems that $890 is a decent target for possible support. Bulls need gold to close above $950 and doing so would further frustrate the bears. It's very difficult to make a call right here due to the cross-currents both fundamentally (accepting inflation as inevitable) and technically (given that gold is still in an uptrend but could be running out of steam). Gold is also roughly in the exact middle of a key technical zone - $1,000 as resistance and $850 as support. We are going to have to monitor gold very closely to watch these levels. I would suggest that trading at these levels would be difficult, so if you're not required to be in a position, it might be best to wait until this market develops a clearer picture. 10

11 I'm showing a bonus "Fibonacci Confluence" chart of @YG (mini-gold continuous contract) weekly prices.

11 11 I'm showing a bonus "Fibonacci Confluence" chart (mini-gold continuous contract) weekly prices. Without revealing the methodology, we see two levels to watch closely beneath price and one level to watch above price. The first confluence comes in exactly where price is sitting now, which leads us to believe we *could* get a bounce off the weak confluence at $900 to $912. Should price break this level, a stronger (confirmed and closer) confluence comes in at $865 which would be a clear target to play for short should gold break $900. The upper confluence comes in at $960 which would be a target should gold begin to rally from these levels. With gold sitting directly ON a confluence and then two levels of confluence above and beneath price, making a firm call is difficult. The "If/Then" trade would be to enter long here and place a stop beneath $900 to play for $960, OR would be to wait for a clean break of $900 and then play for the $865 target with a stop above $

12 Daily The Daily Chart shows a bearish cradle (sell) has formed just above $925. The 38.2% Fibonacci retracement from the November lows comes in at $888. The 200 day SMA rests at $875.

12 12 Daily The Daily Chart shows a bearish cradle (sell) has formed just above $925. The 38.2% Fibonacci retracement from the November lows comes in at $888. The 200 day SMA rests at $875. Price appears to be cresting lower and does not have daily chart support until the $888 level (not to mention 'round number support' at $900). Gold may have formed a 'double top' from February to June, so if so, we would interpret this as bearish. The daily chart does tip the scale to the bearish side UNLESS we get a clean close above $925 and especially $950. Until then, I would be bearish to neutral on gold and also watch the S&P 500 for clues (a rally/support in stocks would perhaps be bullish while a fall in stocks and other commodities would be bearish for gold). 12

10-Year Treasury Notes ($UST Price)

1 Weekly Inter-market Technical Report 10-Year Treasury Notes ($UST Price) Monthly The 10-Year Note has developed a clear rising parallel trend channel that reaches now to the $128 level with confluence