We have not discussed the 30yr Treasury yield ‘Continuum’ for a while because it has been clustering in a consolidation as the frustrating macro of 2021 continues into 2022. If I am a market watcher hoping for near-term resolution (and thus, direction) I am hoping for this consolidation to break up or down.
Today, the hint is up, which is fine. Please Mr. Yield, just pick a course and stay with it.
So if the breakout from consolidation is real then we’d remain on the course for the 2.5% caution zone on the Continuum. Recall that commodities are rising with the yield, as they would in an inflationary environment. I have been wondering whether or not the yield would hit the 2.5% to 2.7% zone before the inflated macro dis-inflates. That is because markets always – after testing your metal enough – seem to push extremes. It would be odd for the Continuum to abort below 2.2% and today gives evidence that we may well push the target zone after all.
The view has, after all, been for CRB to the 270+ target (closed at 259 yesterday) in conjunction with the 30yr at 2.5% (or a little higher into the red limiter caution zone).
A final note, however. You may recall another chart of the yield that we used last year to entertain the possibility that the Inverted H&S pattern measures all the way to 4%. Now, that is a measurement off of a pattern and let’s have all due caveats about patterns (they are often in a TA’s fantasy as opposed to reality). But if it proves to be real, then that would rhyme with a Stagflationary situation and we’d also hear a lot of talk about hyperinflation and a von Mises ‘Crack-up-Boom’.
I don’t write stuff like that often because I want us to be calm and rational. But what, really, is rational about the way the modern market is run by centrally programmed policy?