30 Year US T-Bonds Hit New Highs (D,W)
Created on Saturday, 28 March 2015 01:18
Written by Austin Galt
Since my last report, the Federal Reserve met and kept the interest rate unchanged. This has led to the price gapping up on the new contract. Let’s take a look at both the bond price using the daily chart and the yield using the weekly chart.
30YR US T-BONDS DAILY CHART
I have drawn a horizontal line which represents the previous swing low level which was set in December 2014 at 142.34. Price recently put in a low just above that level which was a higher low and kept the uptrend intact.
This was on the day of my last report and I expected price to continue on to break that level. I could not have been more wrong. That is what a reverse indicator looks and as much as I hate to admit it there is no running away from it. Poor form on my behalf. Price immediately started to head higher and then gapped up on the new contract.
The 50 period (blue), 100 period (red) and 200 period (black) moving averages were all ordered as they should be for a solid uptrend with the blue line above the red line which is turn above the black line. These averages might start to spike up too now which may be a sign that the end is near.
The Relative Strength Indicator (RSI) just made a new high and I would prefer the final high to show a less strong reading - a bearish divergence.
The Moving Average Convergence Divergence (MACD) indicator shows the averages have diverged and a correction now would seem them come back together.
Let’s now look at the yield.
30YR US T-BOND YIELD WEEKLY CHART
I have drawn a horizontal line denoting a double bottom which was formed by the December 2008 and July 2012 lows around the 2.5% level. This double bottom was against the trend so it was not surprising to see price break below this level.
We can see clearly a lower high and lower low in place. So a bear trend is still the order of the day.
The Parabolic Stop and Reverse (PSAR) indicator has a bullish bias so we may well see interest rates increase further from here.
I have added the same moving averages and these may provide resistance for any interest rate increases.
The RSI shows a new low so after this current rate rise I would like to see rates fall to new lows which are accompanied by a less weak reading – a bullish divergence.
The MACD shows a bearish crossover is being threatened. If rates are set to rise a bit further now then it is time to get a wriggle on.
Summing up, the yield does look likely to rise a bit further and while my short term bond price forecast was wrong, the main forecast of new highs has proven true and the fact that it has already occurred means the end game is that much closer.