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TECHNICAL ANALYSIS


Interesting Rates

03/30/11 03:18:44 PM
by Austin Passamonte

Here's the midterm outlook for 30-year bond and 10-year note futures.

Security:   ZB, ZN
Position:   N/A

US bond markets have been on a wild ride these past couple of years. From the stock market crash of 2007-08 through the POMO years of 2010 up to now, debt instruments made some pretty big swings. A look through the charts appears to say that more of that is on the way.

FIGURE 1: 30-YEAR BOND FUTURES, DAILY
Graphic provided by: NinjaTrader.
 
Thirty-year bond futures (ZB) have rolled from 130s peak highs to 115 swing lows since government graft interventions became a daily permanent market operation. For a couple of months, price wedged itself into a sideways apex that has broken below in bearish fashion and summarily broken back above in very bullish fashion.

That type of fakeout-breakout to the downside followed by failure to continue lower and reverse back through the opposite side of pattern is a classic "oops" trade profiled by traders Larry Williams and Tom DeMark a few decades ago. The principles of resistance and support remain timeless. ZB is bullish at/near upside of this pattern and bearish at/below breakdown through the same.

FIGURE 2: 10-YEAR NOTE FUTURES
Graphic provided by: NinjaTrader.
 
The US 10-year note (ZN) appears to be the weaker instrument of these two. A similar wedge pattern recently broke downside, retested prior support and resistance, only to break back downside once more. A near-term trendline (navy blue) just below the current resting price is the last line in sand before a couple of whole points lower probes next levels down.

With the US debt ceiling near to being breached, questions about continuation of quantitative easing II (QEII) and merits of QEII along with media Q&A after the next FOMC meeting this month, US interest rate futures have a full plate in front of their charts. What takes place here will precede what happens in stock index markets and other commodity and currency markets to follow.



Austin Passamonte

Austin is a private trader who trades emini stock index futures intraday. He currently trades various futures markets from home in addition to managing a trader's educational forum

Title: Individual Trader
Company: CoiledMarkets.com
Address: PO Box 633
Naples, NY 14512
Website: coiledmarkets.com/blog
E-mail address: austinp44@yahoo.com

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