The 30yr Treasury yield ‘Continuum’ is one of our more important macro indicators. Specifically, it has been an indicator of inflation tolerance or deflation fear over several decades. This year the Continuum’s ‘backbone’ was broken as the yield broke through what had formerly been resistance moving averages and are now support MAs.
Back on August 19th we noted that the yield was breaking upward again:
Here is this morning’s conclusive break upward. Will it favor commodities and inflation trades for a bit? It’s possible. But at some point rising yields would probably bring similar pressure to most markets as last spring.
Also:
The above can still work within the framework of the big picture (monthly) ‘Continuum’ view. If TYX does not take out the previous high that came at our 3.45% target, we could still have a move lower to test the 2.5% pullback target area. But if the above were a stock I would consider buying it for a short-term trade.
Here is the daily chart and the monthly chart above shows the ‘framework’ of a rise to test 3.45%. Of course it is also possible that it breaks through and keeps on going. Indeed, were this a stock the implication would be a new high.
Bottom Line
Be careful out there. The macro situation is far from resolved.
