With the 30yr yield breaking upward today (daily chart)…
…let’s review the original theme (back in play after a little macro whipsaw), which was to build a right side shoulder on the 30yr yield ‘Continuum’ (monthly chart) and then evaluate the inflation trades if/as the shoulder resolves upward to the limiting moving averages.
Option A: EMA 100 & 120 limiters hold once again as they have on all previous occasions for decades, or…
Option B: We break on through to the other side, in a more virulent inflationary macro with old Ludwig van in charge. von Mises that is. He of Austrian economics and the inflationary ‘Crack-up-Boom’.
So here again – because I never get tired of this compelling chart – is the 30yr yield Continuum, AKA the monthly chart with the EMA 100 & 120 (red), which have limited moves and maintained the downward trend in long-term yields over decades.
While the 2.5% area is lower than the last high the convergence of the Inverted H&S neckline with that level makes it a candidate to stop the inflated party. But it could also get impulsive and temporarily break the limiters to anywhere below 3.4% (previous high, 2018) and still technically maintain the downtrend. If the Continuum is to make a high and reverse within the downtrend (again) the indication would be inflation’s failure. If it were to break out and start a new trend well, then we’d be in a new and virulent inflationary phase. Hello Ludwig van…
Meanwhile, whatever is ahead on the near to intermediate-term, commodities tend to be in positive correlation with the yield because the yield tends to be in correlation with inflation. The current theme is open mindedness, but with a caution signal to at least pause for evaluation if/as the yield nears 2.5% again.
