We used the 30yr yield Continuum to project a pullback in the inflation/reflation trades and associated inflation hysteria as the yield approached 2.5% back in late winter. We then planned for a roughly symmetrical right side shoulder to be put in to go with the one on the left side of a theoretical inverted H&S.
Well, there it is…
The right side shoulder should have dropped to or just below 2% to potentially complete the pattern.
Well, switching to a daily chart we see a tick below 2% today. The herds that once feared rising rates have been reacting to declining rates (rotations to Tech, Growth from Commodities, Resources, Value, etc.) and this is all so perfect to our plans that I have to wonder what will throw a monkey wrench into those plans.
The 30yr yield is approaching a logical support point at the rising daily SMA 200. If a little summer deflation whiff gets into the picture maybe 1.7% can be seen (there’s a gap down there). But the bottom line is that we can now go on watch for our forward options, which are…
- Resumption of the inflationary reflation trades.
- Goldilocks, w/ a “just right” mix of low inflation pressures and intact economy.
- Deflationary liquidation of the inflationary operations put on the macro since March 2020.
