In our last piece, we presented a long term/secular outlook for intermediate-term Treasuries, where we concluded that the structural break above the secular downtrend from the September 1981 high, coupled with the push above the November 2018 pivot @ 3.25%, has changed the long-term secular trend from lower (a bull market) to neutral. More work is needed to move the secular trend from neutral to bearish. In this piece, we’ll assess how the weekly chart might interact with the monthly chart, and then begin to think about how investors can react to various scenarios as they are set up over the course of the next several weeks and months.
As a warning, my analysis of the shorter perspective time frame didn’t leave me with an actionable trade or even a clear expectation for a probable outcome over the next few weeks. I think the market is ready to move away from the current congestion zone, and I suspect that the direction out of the zone will provide shorter-term traders with ample opportunity for entries. This analysis has allowed me to identify the important chart points/zones around which I will pay particular attention to behaviors and market structure, and to define appropriate trading plans.
10-Year Treasury Yield: Annual Perspective
The chart below is the yearly perspective of the 10-Year Treasury note (INDX).
Chart 1: Annual Chart of the 10-Year Treasury Yield
Note the break of the secular downtrend and the push above the 3.35% pivot. It’s worth noting that the Moving Average Convergence/Divergence (MACD) oscillator has turned higher for the first time since 1985.
Keep in mind the following points:
The basic definition of an uptrend is a market consistently defining higher highs and higher lows. For instance, a great example of a downtrend can be seen in the annual 10-year Treasury chart, where, over several decades, yields consistently made lower lows and lower highs, defining a very clear and obvious bull market (yields down/prices up).For bonds to begin defining a secular bear (bond prices down/yields up), it will require yield to set back from a high pivot, define a higher low pivot, and subsequently make a substantive new high. From that point, you can draw tentative annual and monthly trendlines, and channel projections. You can also make Fibonacci and point-and-figure price projections. Importantly, this structure would define a secular bear and place weekly and monthly momentum harmoniously with annual momentum. I expect this transition to occur over the next 12–18 months.The biggest question in my mind is whether last October’s 4.98% high print marked the terminal point for the bearish structure that has built since the 0.40% low. I suspect that is indeed the case and that, by mid-year, yields will be falling. However, there is also a reasonable case for one final push higher into the stronger resistance zone at around 5.25%, before subsequently setting back and defining the higher low. Given this view, the evolution of the weekly chart over the next few months becomes particularly important.
10-Year Treasury Yield: Weekly Perspective
Below is a weekly chart of the 10-Year US Treasury Yield ($TNX).
Chart 2: Weekly Chart of the 10-Year Treasury Yields Note the following points of the chart:
Bonds typically build reliable channels and trendlines, but the move from 0.40% is atypical in that a solid trendline or channel is difficult to find.Since the move from the low doesn’t provide a solid trendline or channel, I am focused on the 2.52–3.25% (A-B) trend line. The decline from 4.98% since last October has repeatedly weakened it, and the bounce from the trendline has been very modest.The inability of the trendline to generate selling (higher yields/lower prices) suggests that the pressure isn’t strong.It is likely that a decline below the 3.79% pivot would likely stretch back to the 3.25% pivot, with a higher likelihood of the area around 2.65% (retracing roughly 1/2 of the 0.40% to 4.98% move).The move from 3.79% has generally presented as a bull (lower yield/higher price) flag. Flags are usually corrective against the trend. Note that volume during the period has declined significantly (as would be expected), albeit from the extremely high volumes that developed during the move to last October’s high.One of my favorite patterns is the “three drives to a high or low.” While this chart may technically qualify (3.48% –> 4.33% –> 4.98%) the push to 3.48% only barely qualifies, as it’s not proportional to the first two thrusts. This chart is potentially set up for a final drive higher to complete the sequence, perhaps into the strong resistance at the 5.25–5.35% area.I will also be monitoring the price for a secondary test of 4.98%. A completed secondary test would set up for a significant bull (yield down/price up) market.
The balance of the structural evidence on the weekly chart favors lower yields, but it’s a close call and not particularly actionable from these levels.
Looking At Momentum
The multiple-screen momentum perspective below is a quick filtering method I use. Importantly, momentum is fractal (robust across time frames and markets). I prefer to derive the trend through the tape, so I only use the oscillators as a quick filter.
The chart below displays the annual, monthly, weekly, and daily charts of the 10-Year Treasury Yield. Note that on the chart, we move back to yield again.
Chart 3: Annual, Monthly, Weekly, and Daily Charts of the 10-Year Treasury Yield
An important point to remember: Rising yields = lower price.
Yearly momentum has turned toward higher yield/lower price.Monthly momentum has turned toward lower yield/higher price. A slight negative divergence has formed, and the monthly is at odds with the yearly.Weekly momentum is mixed/neutral, but attempting to turn to higher yield/lower price. This struggle around the zero line suggests that behaviors over the next few weeks will likely define the direction of the next 25–50 basis point movement.
I am most interested in the weekly trend (in rates, the weekly perspective is the most important), so I generally defer to the trend of one higher degree. In this case, the monthly is on a lower yield/higher price signal and is just now moving into the MACD quadrant, where significant declines (in yields) are likely to take place; Odds are better that the weekly will also turn to lower yield/higher price to be in harmony. But, again, the evidence is mixed. Sometimes, you just need to let the price action evolve before drawing a solid conclusion.
A Weekly Perspective of TLT (Bond ETF)
Chart 4: Weekly Chart of TLT
Some important points re. volume:
Since we’re viewing the iShares 20+ Year Treasury Bond Fund (TLT), we’re looking at price (a downtrend is a bear market) rather than working with yield. This is because the yield indices we are using have no reported volume. The caveat here is that, in my professional capacity, I prefer to use futures volume, as they better represent institutional-rate investors, while TLT has a distinctly retail focus.The evidence between futures and ETF volume is conflicting. TLT showed clear signs of short-term capitulation last October, but did not display a classic selling climax.Futures are more ambiguous, with no clear surge in volume, but price behaviors are more consistent with a selling climax.Since the October low, the volume in general has remained quite high, and the upward progress is relatively modest. The poor result for the effort expended suggests that the market continues to run into quality supply. The same price/volume relationship is also present in futures.Note the rapid fall in volume over the last three to four weeks as the market tilted higher. This is consistent with a bear flag or pennant.Finally, note the volume spike (arrow) as sellers leaned into the market a few weeks ago. There are still strong-handed sellers willing to hit bids into strength.
I think the balance of evidence suggests that the market made a selling climax in October. That climax will likely hold for most of this year, but may be retested.
10-Year Treasury Yield Daily
Chart 5: Daily Chart of 10-Year Treasury Yield
Note the following points:
Seasonal Tendency. Yields tend to set significant intermediate highs early in the year before declining into mid-year. We are near the end of the bearish (yields up/prices down) annual period. This would suggest a push lower (yield down/price up).Yields have struggled to move away from the uptrend (A/B) but generally have built a bull (prices up/yields down) flag. Now, they are being squeezed between the internal resistance (gray lateral trendline) and the A-B channel bottom. From this perspective, bears (yields higher/prices lower) have an advantage.If the market breaks higher from this zone, where would resistance materialize? If yields breakout higher from this zone, there isn’t much resistance between 3.50% and last year’s @ 4.89% high. Above 4.89%, 5.25–5.35% is a reasonable target.If the market breaks lower from this zone, a solid support confluence exists in the 3.23–3.30% zone. But it is more likely the 0.50–0.618 retracement zone in the 2.15–2.70% zone would be in play. This would likely come as the result of an economic recession.
The Bottom Line
The next few weeks should represent a significant juncture in the daily and potentially the weekly chart. The market has generally been consolidating over the last several months, and the pattern breakout could be meaningful. For shorter-term traders, the direction out of the consolidation will likely define the direction of travel into the fall. In other words, it is a go-with.
If yields break out higher, I will likely begin selling the breakouts of bear (prices down/yields higher) flags and will view short-term declines in yields as selling opportunities. If lower, I will likely be a buyer of bull flags and setups (yields down/prices higher) as they develop.If the market falls away from the trendline with velocity, the first solid support there is found in the 3.79% zone.I continue to see a not-trivial chance of one last push higher into the 5.25–5.50% zone, before beginning a major weekly and monthly perspective correction (yield down/price up) that eventually makes the higher low. And while I see an advantage to being generally bullish over the next few months (falling yields, rising prices), the analysis is tentative, with only a small near-term advantage to the trade. In my trading, I would consider it non-actionable without additional price/volume development or reasonable structure to trade against.
In deference to my macro work and business cycle work, I will be a better buyer of bullish inflections in the weekly chart over the next few months, as I fully expect a significant economic slowdown to develop into the end of the year.
Disclaimer: Shared content and posted charts are intended to be used for informational and educational purposes only. The CMT Association does not offer, and this information shall not be understood or construed as, financial advice or investment recommendations. The information provided is not a substitute for advice from an investment professional. The CMT Association does not accept liability for any financial loss or damage our audience may incur.
Energy Improving in Three Time Frames
Watching sector rotation at the start of this week shows a continued improvement for the Energy sector (XLE). Even though XLE has the lowest reading on the JdK RS-Ratio scale, it has a long tail, and it has just entered the improving quadrant.
This happens after a very long rotation and at very low RS-Ratio levels, but when I combine this rotation with the XLE tails on the daily and monthly RRGs, it becomes interesting.
On the daily RRG the tail is well inside the leading quadrant and still pushing higher on strong momentum. The RRG-Heading has slowed slightly but is still within 0-90 degrees.
On the monthly RRG, the XLE tail is still inside the weakening quadrant and starting to hook back up. This is interesting as it signals the potential start of a new up-leg in the already existing relative uptrend.
All in all, this means we now have positive developments for the energy sector in all three time frames.
Getting Close To Major Overhead Resistance Area
And the improvement is not only relative. On the price chart, XLE is now moving towards overhead resistance offered by four major highs since 2022 which were all set just below 95.
Be careful, with the big rallies that have taken place in major markets and sectors, it is easy to think that breaking that 95 barrier in XLE would mean a break to new all-time-highs.. That is NOT the case for the energy sector. As you can see on the monthly chart below.
The 95 area is undeniably an important resistance level and when it can be broken that will certainly fuel (pun intended) a further rally towards the all-time-high level for XLE which is at 101.52 in June 2014. Almost 10 years ago.
What is also interesting to see is that XLE tested support coming from lows dating back as far as 1999 and 2002 around 20, only four years ago in 2020. Out of that low a 475% rally emerged taking XLE from 26 to 95 which is more than any other sector in the same time period.
This PerfChart shows the performance for all sectors since the March 2020 low. The teal line at the top is XLE. Only XLK in purple comes close to the performance of XLE and only because of the rally that started in October 2022.
Long Term Turnaround In the Making
It is this huge outperformance that has kept the XLE tail on the monthly RRG on the right hand side of the graph for so long and the recent relative improvement is causing this monthly tail to start curling up again.
As you know the usual message in case of a hook back up inside the weakening quadrant is for starting a new up-leg within an already rising relative trend.
Looking at the monthly chart of XLE in combination with the RRG-Lines and raw RS above, that is exactly what seems to be happening. And it is happening after an initial rally that ended a relative downtrend of XLE that started back in 2008.
When the raw RS value of Energy vs SPY climbs above 0.25 an acceleration in relative strength, and a much further rally in favor of Energy is likely.
–Julius
In this edition of StockCharts TV‘s The Final Bar, Dave welcomes guest Chris Ciovacco of Ciovacco Capital Management. David focuses on downside risk for GOOGL and AMZN, and shares one utility name that should be on your radar! Chris updates a weekly S&P 500 chart he first shared in April 2023, and describes why the long-term trend in the S&P 500 still appears strong.
This video originally premiered on March 19, 2024. Watch on our dedicated Final Bar page on StockCharts TV!
New episodes of The Final Bar premiere every weekday afternoon. You can view all previously recorded episodes at this link.
A Trader Joe’s-branded cashew product sold in 16 states is being recalled over salmonella contamination concerns.
In a notice posted on the Food and Drug Administration’s website, Wenders LLC said some of its Trader Joe’s 50% Less Sodium Roasted & Salted Whole Cashews product had tested positive for the presence of Salmonella during a routine examination.
No illnesses have been reported to date, Wenders said.
Consumers should return affected products — which have the SKU number 37884 and lot numbers T12139, T12140, T12141, and T12142 — for a full refund, it said.
Food recalls have reached a five-year high, according to a recent study by benefits group Sedgwick, although experts say some of this may be due to better detection methods. Additionally, many of the incidents involved undeclared allergens.
Last month, Trader Joe’s recalled chicken soup dumplings over foreign-matter contamination concerns. Trader Joe’s recalls have often involved foreign material, including metal, rocks and insects, which at least one expert has said is the natural result of its use of smaller-batch production sources.
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The Environmental Protection Agency on Monday announced a comprehensive ban on asbestos, a carcinogen that is still used in some chlorine bleach, brake pads and other products and that kills tens of thousands of Americans every year.
The final rule marks a major expansion of EPA regulation under a landmark 2016 law that overhauled regulations governing tens of thousands of toxic chemicals in everyday products, from household cleaners to clothing and furniture.
The new rule would ban chrysotile asbestos, the only ongoing use of asbestos in the United States. The substance is found in products such as brake linings and gaskets and is used to manufacture chlorine bleach and sodium hydroxide, also known as caustic soda.
EPA Administrator Michael Regan called the final rule a major step to protect public health.
“With today’s ban, EPA is finally slamming the door on a chemical so dangerous that it has been banned in over 50 countries,’’ Regan said. ”This historic ban is more than 30 years in the making, and it’s thanks to amendments that Congress made in 2016 to fix the Toxic Substances Control Act,’’ the main U.S. law governing use of chemicals.
Exposure to asbestos is known to cause lung cancer, mesothelioma and other cancers, and it is linked to more than 40,000 deaths in the U.S. each year. Ending the ongoing uses of asbestos advances the goals of President Joe Biden’s Cancer Moonshot, a whole-of-government initiative to end cancer in the U.S., Regan said.
“The science is clear: Asbestos is a known carcinogen that has severe impacts on public health. This action is just the beginning as we work to protect all American families, workers and communities from toxic chemicals,’’ Regan said.
The 2016 law authorized new rules for tens of thousands of toxic chemicals found in everyday products, including substances such as asbestos and trichloroethylene that for decades have been known to cause cancer yet were largely unregulated under federal law.
Known as the Frank Lautenberg Chemical Safety Act, the law was intended to clear up a hodgepodge of state rules governing chemicals and update the Toxic Substances Control Act, a 1976 law that had remained unchanged for 40 years.
The EPA banned asbestos in 1989, but the rule was largely overturned by a 1991 court decision that weakened the EPA’s authority under TSCA to address risks to human health from asbestos or other existing chemicals. The 2016 law required the EPA to evaluate chemicals and put in place protections against unreasonable risks.
Asbestos, which was once common in home insulation and other products, is banned in more than 50 countries, and its use in the U.S. has been declining for decades. The only form of asbestos known to be currently imported, processed or distributed for use in the U.S. is chrysotile asbestos, which is imported primarily from Brazil and Russia. It is used by the chlor-alkali industry, which produces bleach, caustic soda and other products.
Most consumer products that historically contained chrysotile asbestos have been discontinued.
While chlorine is a commonly used disinfectant in water treatment, there are only 10 chlor-alkali plants in the U.S. that still use asbestos diaphragms to produce chlorine and sodium hydroxide. The plants are mostly located in Louisiana and Texas.
The use of asbestos diaphragms has been declining and now accounts for about one-third of the chlor-alkali production in the U.S., the EPA said.
The EPA rule will ban imports of asbestos for chlor-alkali use as soon as the rule is published, but a ban on most other uses would take effect in two years.
A ban on the use of asbestos in oilfield brake blocks, aftermarket automotive brakes and linings and other gaskets will take effect in six months. A ban on sheet gaskets that contain asbestos will take effect in two years, with the exception of gaskets used to produce titanium dioxide and for the processing of nuclear material. Those uses would be banned in five years.
The EPA rule allows asbestos-containing sheet gaskets to be used until 2037 at the U.S. Department of Energy’s Savannah River Site in South Carolina to ensure that safe disposal of nuclear materials can continue on schedule, the EPA said.
Scott Faber, senior vice president of the Environmental Working Group, an advocacy group that pushed to ban asbestos, hailed the EPA action.
“For too long, polluters have been allowed to make, use and release toxics like asbestos and PFAS without regard for our health,’’ Faber said. “Thanks to the leadership of the Biden EPA, those days are finally over.”
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This post appeared first on FOX NEWS
This post appeared first on FOX NEWS