I’d like to remind that the monthly #US10Y candle closed in April above the 200 monthly MA for the first time since 1985! On May 6th, US10Y stretched the weekly RSI to 81.58, the third highest ever. What could go wrong?
I think that this week the bonds started to experience a technical reaction to the overstretched conditions.
The weekly US10Y formed a strong Dark Cloud Cover and $IEF made a mirroring bullish Engulfing. If the initial move confirms next week, the bond market should expect a sharp reversal and I am curious about the kind of action the authorities will introduce that the candles have been anticipating for already several weeks.
If we look at the waves, the overlaps of major waves are striking, signaling a possible completion of an ending diagonal and a sharp correction towards the level of origin. Something like this:
If you would like to know how Ending Diagonals work, this is the most recent call on $GDX. An early recognition of an ending diagonal allowed me to forecast a 30% move down:
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