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US 10yr futures, bottoming?
Thu, May 29 2008, 07:46 GMT
by David Solin
US 10yr note futures continue lower, currently reaching levels not seen since the start of the year. Note however, that the market has not been able to build on new lows over the last month (poor/slowing downside momentum) and may be forming a falling wedge. These are generally seen as bottoming patterns that resolve sharply higher, and suggests gains toward the ceiling (currently at 116/00) and even above ahead (see “ideal” scenario in red on daily chart below). Note that the daily macd remains in buy mode (bullish divergence too, see bottom of chart) also suggesting that the market may be near at least a temporary bottom. With the market currently near the base of the wedge, looks like a good risk/reward area to get long and would buy here (currently at 114/01). Initially stop on a close below longer term support at 113.22/25 (38% retracement from the June low at 103/20), as it could trigger a further downside acceleration. However, will want to raise it to something more aggressive on a break above the ceiling of the wedge as the market may be stuck within an extended, multi-month period of wide consolidating. Resistance above the ceiling is seen at 117/00.
Long term, the market is down from the March high at 120/01, just short of the target since last summer at 120/14 (June 2003 high). However, the last 2 months of weakness may be a correction (wave IV in the rally from June 2007 low at 103/21, see numbering on weekly chart/2nd chart below) with potential for new highs above 120/01 after. However, there are no signs (at least so far) that a bottom of that magnitude is in place so the longer term bias (at least for now) is neutral and would trade the shorter term view (see above).
Published on Thu, May 29 2008, 07:57 GMT
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