Tag Archives: interest rate

An Update On The U.S. Treasury Bond Breakout

Since the start of the year, I’ve been watching and showing that the “smart money” (commercial futures hedgers) have been bullish on U.S. Treasury bonds and bearish on crude oil, in direct contrast to the “dumb money” (large trend-following traders) and the mainstream financial community. Two weeks ago, I showed several charts that seemed to indicate that U.S. Treasury bonds were breaking out to the upside. As usual, I wasn’t making market predictions, but pointing out observations that I thought were worth paying attention to.

After their initial breakout from triangle patterns, Treasury bonds eased a bit as traders braced themselves ahead of last week’s Fed meeting. Since that meeting, however, U.S. stocks have resumed their sharp sell-off, which has helped to buoy Treasuries and create follow-through after their breakout two weeks ago.

As the chart below shows, the 30-year U.S. Treasury bond broke out of its triangle and appears to be gunning for its next major resistance level, which is the downtrend line that started in September 2017:

30 Year Treasury Bond DailyThe 10-Year Note shows a similar pattern. If the 10-Year can break above its downtrend line in a convincing manner, it would give a bullish confirmation signal.
10 Year Note Daily

The 5-Year Note recently broke out of a channel/wedge pattern as well as its downtrend line that started in September, which is a bullish sign, as long as this breakout holds.

5 Year Note Daily

The 2-Year Note also broke out of a channel and is testing its downtrend line. If it can break above this resistance, it would be a bullish sign.2 Year Note Daily

As I’ve been showing, the “smart money” or commercial futures hedgers are quite bullish on the 10-Year Note. The last time they became this bullish, Treasuries rallied (despite extreme public bearishness).10 Year Note Weekly

As my colleague Michael Lebowitz showed last week, U.S. Treasury yields have been bumping up against a very important, long-term trendline that goes all the way back to the late-1980s. If Treasury yields can close above this line, it would be bullish for yields and bearish for Treasury bond prices, but if they can’t close above this line, it may lead to another decline in yields (and surge in Treasury bond prices).


Crude oil is worth watching closely in order to understand U.S. Treasury bond movements (crude oil and Treasury bond prices move inversely). WTI crude oil is sitting just under its $65 resistance level, which marked the highs in January and February. If crude oil fails to break above this resistance and falls back down, it would be bullish for Treasuries (and vice versa).

WTI Crude Daily

Brent crude oil is sitting just under its $70 resistance level:

Brent Crude Daily

As I’ve been showing, the “smart money” are even more bearish on WTI crude oil than they were in early-2014, before the oil crash. If the “smart money” are proven right and oil experiences another strong bearish move, it would be bullish for U.S. Treasuries.

WTI Crude Weekly

The latest bout of weakness in the U.S. stock market has been helping to support U.S. Treasuries. Treasuries often benefit from the “flight to safety” effect when risk assets such as stocks sell-off. As the chart below shows, the SP500 is sitting just above an important uptrend line that started in early-2016. If the market sell-off continues and the SP500 breaks below this line in a decisive manner, it would be a worrisome sign for stocks, but a bullish sign for Treasuries. If the SP500 is able to stage a strong rally off this uptrend line, however, it would be bearish for Treasuries.

SP500 Weekly

As usual, I will keep everyone updated on these charts and markets I’m watching.

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