Long-term Interest Rates and the Macro Plan

Folks, the ‘yield’s rising to the limiters’ near-term plan has been frustrating. Not for my own investment and trading because I’ve stayed balanced with a focus on interest rate  neutral sectors, but because it makes so much sense within the context of several different macro items that could one day come together to form a massive macro fundamental sell signal on the stock market.

Those components are for stocks to finish outperforming vs. gold, 10 & 30yr yields to rise to 2.9% & 3.3% (+/-), respectively and for the yield curve to make a low. Thing 2 seemed like it was engaging when the daily 10 & 30yr yield charts made bottoming patterns and Things 1 & 3 are in process but could still have quite a way to go.

A couple days ago I affixed my tin foil hat and speculated about the coming of Operation Twist by another name and method. Who knows whether or not the bond market is factoring any of that in yet but taken at face value, its implication would hinder long-term yields and while it serves to keep the macro nice and bullish with a flattening yield curve, it would at least drive the curve down toward future resolution.

Here again are the big picture components. By all views there appears a playable amount of upside left in risk ‘on’ items, especially stocks. The graphic has aged a couple weeks and the yield curve has actually dropped further, but you get the picture.

3 amigos

It seemed nice, neat and clean to have the 10 & 30yr yields rise to the limiters in the near-term off of the bullish daily patterns. But you know TA, she can be a cruel mistress. It goes the other way too. Yesterday TLT put a bullish flavor to its daily chart and of course today the 30 year bond is down (yield up).

So, retreating to the big picture chart we find that the 10yr bond and yield are still in break down and break up mode, respectively.

ust, tnx

And the 30yr bond is still in a potential bear flag while the yield is below resistance and has not broken up from a potential bull flag.

usb/tyx

So the rising yields (to the limiters) play is not dead. I really hope it regenerates because I’d love to be able to cross reference multiple major macro signals together down the road in order to lay out sensible plans for what comes next.

Right now, it’s bullish out there. As you were. Enjoy your turkey and all the fixin’s.

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