Near-term U.S. 10-Year note yield outlook:
The market has indeed continued higher from the May 13th low at 1.70% as the long held view of an extended period of consolidating from that February 11th low at 1.53% (wave 4 in the decline from the June 2015 high at 2.50%) and with eventual new lows after (within wave 5) continues to play out. Additionally still appear to forming a large triangle/pennant over that time (tighter and tighter range), generally viewed as a continuation pattern (that often resolves sharply) and adds to the view of new lows below 1.53% after. Note too that triangles break down to 5 waves and with the last few weeks of upside potentially that final leg (wave v), raises the potential of a sharp downside resolution nearby (see in red on daily chart below).
A final note, even an upside break of the ceiling/bearish trendline from March (currently at 1.91/93%) would not abort the bigger picture view of a large correction since Feb (though it would argue further, near term gains first). Nearby support is seen at the bullish trendline from May 13th (currently at 1.83/85%), 1.77/79% (50% from the 1.70%) and the bullish trendline from Feb. 12th/base of the triangle (currently at 1.70/72%).
Bottom line: large correction since Feb. 11th low at 1.53%, with potential for a sharp decline to new lows ahead.
Strategy/position:
Long from the May 11th at 1.73% (near the base of the triangle) and for now would stop on a break 0.02 below that bullish trendline from May 16th (redrawing for the temp breaks below over the last few days). Note too would stop on an intraday break (and even reverse) given the potential for an approaching, sharp move lower and in that case stopping on a close 0.2 above the ceiling of the triangle (reversing only if the market is still below that ceiling).
Long term outlook:
As discussed above, eventual declines below that Feb 1.53% low is still favored. This also "fits" the very long held view of eventual declines below the Jun 2012 low at 1.38% as the market continues to form that very long discussed falling wedge since 2003 (over the last few years). These patterns break down into 5 legs and a with decline below 1.38% needed within that final leg. But be warned, this does not necessarily mean a decline below 1.38% directly on a break of 1.53%, and may be a more extended period of broad ranging lower (initially limited lows on a break below 1.53%, see in red on weekly chart/2nd chart below). Bottom line : long held view of declines below that June 2012 low at 1.38% remains (though scope for a more extended period of broad ranging lower) as the market continues to form that huge falling wedge since 2003.
Strategy/position:
Switched the longer term bias to the bearish side way back on Dec 17th at 2.09% for eventual declines below that June 2012 low at 1.38%. However, with risk for a more extended period of ranging will want to quickly reassess on a break below that Feb spike low at 1.53%.
Current:
Nearer term : long May 11th at 1.73% (near base of potential triangle since Feb).
Last : short Mar 3 at 1.83%, flattened Apr 21 above t-line from Dec (then 1.84$, closed 1.87%).
Longer term: bear bias Dec 17th at 2.09% for eventual new lows below 1.38%.
Last : bullish bias Dec 5th at 2.30%, neutral Dec 16th at 2.09%.
