|On the weekly chart, the gray oval shows the key outside reversal week. This pattern forms with an open above the prior week's high and a close below the prior week's low. The bulls started the week strong, but the bears soon wrestled control and forced prices below the low of the prior week. Weekly key outside reversals can be powerful patterns to signal a peak in the market. At the very least, this key outside reversal establishes an important resistance level at 90.80.|
|Figure 1: Weekly chart for the iShares 7-10 Year Treasury Bond Fund (IEF).|
|Graphic provided by: MetaStock.|
|The daily chart confirms medium-term weakness. A key outside reversal day formed at 90.80 (gray oval) and IEF broke trendline support with a sharp decline to 88.85. After a brief rally, another key outside reversal day formed (red arrow) and this too was followed by further weakness. In addition, 15-day RSI formed a bearish divergence and moved below 50. Medium-term momentum has swung in favor of the bears.|
Figure 2: Daily chart for the iShares 7-10 Year Treasury Bond Fund (IEF).
|The long-term trend remains bullish though as IEF broke above a major resistance level at 87.8 in early June. Broken resistance often turns into support and a return to scene of the crime (breakout) is quite common. In addition, a 50% retracement of the prior advance confirms potential support around 87.8 and a possible end to the current correction on the daily charts.|
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