Working Money magazine.  The investors' magazine.
Traders.com Advantage

INDICATORS LIST


LIST OF TOPICS





Article Archive | Search | Subscribe/Renew | Login | Free Trial | Forgot ID?


PRINT THIS ARTICLE

SUPPORT & RESISTANCE


10 Year T-Note Yield Approaches Key Resistance

07/11/03 10:06:51 AM
by Arthur Hill

The recent rally in interest rates (decline in bonds) looks explosive, but the long-term downtrend remains intact as resistance nears.

Security:   TNX
Position:   N/A

On the weekly chart (Figure 1), the yield for the 10-year Treasury Note (TNX) fell from 6.83% to 3.07% over the last three years. It was a mammoth move by any stretch of the imagination. The long-term downtrend is clearly intact as TNX remains within a large descending price channel. (Note: Bonds move conversely to interest rates. Bonds advance when rates decline and bonds decline when rates advance.)

The recent rally in interest rates carried TNX back above the support break at 3.56% (3), but this still looks like a reaction rally within a larger downtrend. TNX previously moved back above broken support at 4.69% (1) and 4.13% (2) while keeping the larger downtrend in place. More likely, TNX became oversold after reaching the lower trendline of the descending price channel and this move simply alleviates the oversold condition. The current advance is likely to meet resistance from the consolidation zone around 4% (gray oval) and the trendline extending down from Apr-02.

Figure 1: Weekly chart for TNX.
Graphic provided by: MetaStock.
 
Turning to the daily chart (Figure 2), we can see more evidence of resistance around 3.8%. TNX gapped down in early May and broke support at 3.8% to begin a sharp decline. Broken support often turns into resistance and the gap reinforces this notion. Furthermore, the advance retraced 62% of the prior decline and the move looks like a rising wedge. As long as the wedge rising and the lower trendline holds, it is wise to respect the interest rate bulls (bond market bears). A move below the lower trendline would affirm resistance around 3.8% and open the door to a pullback in rates (rally in bonds).


Figure 2: Daily chart for TNX.



Arthur Hill

Arthur Hill is currently editor of TDTrader.com, a website specializing in trading strategies, sector/industry specific breadth stats and overall technical analysis. He passed the Society of Technical Analysts (STA London) diploma exam with distinction is a Certified Financial Technician (CFTe). Prior to TD Trader, he was the Chief Technical Analyst for Stockcharts.com and the main contributor to the ChartSchool.

Title: Editor
Company: TDTrader.com
Address: Willem Geetsstraat 17
Mechelen, B2800
Phone # for sales: 3215345465
Website: www.tdtrader.com
E-mail address: arthurh@tdtrader.com

Traders' Resource Links
TDTrader.com has not added any product or service information to TRADERS' RESOURCE.

Click here for more information about our publications!


Comments or Questions? Article Usefulness
5 (most useful)
4
3
2
1 (least useful)

PRINT THIS ARTICLE





S&C Subscription/Renewal




Request Information From Our Sponsors 

DEPARTMENTS: Advertising | Editorial | Circulation | Contact Us | BY PHONE: (206) 938-0570

PTSK — The Professional Traders' Starter Kit
Home — S&C Magazine | Working Money Magazine | Traders.com Advantage | Online Store | Traders’ Resource
Add a Product to Traders’ Resource | Message Boards | Subscribe/Renew | Free Trial Issue | Article Code | Search

Copyright © 1982–2019 Technical Analysis, Inc. All rights reserved. Read our disclaimer & privacy statement.