Two weeks ago bonds signaled readiness for reversal. This week candles doubled down by forming a Three Black Crows weekly combo at the top. But this is not everything – there are a few other signals in the closet.
I pulled the most interesting and telling formations that candles made on various frames.
The middle chart is the 15-day candles that happened to close yesterday. A very strong bearish Engulfing points down for at least another 15 days. The candle is greatly supported by technicals and the probability of a southbound move is high.
On the daily chart (left), US10Y have been clearly consolidating just above the 50 DMA before moving further down. By the way, the odds of a sharper move are substantial.
For the mirroring reference, the weekly IEF candles formed a rather strong Three White Soldiers combo that is typically followed by a rally.
US10Y odds: Bearish
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. Apparently these events were just the early warnings.
As you can see on the chart below, the monthly candle shapes up as a bearish one and has a good chance to close below the 200 MA which would be very bearish.
This forecast was written several weeks ago and it stands:
“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. Note that a “sharp” correction on the weekly frame would mean a decline for multiple weeks or even months with several bounces down the road.”
Expect US10Y to continue downwards for multiple weeks/months. Possible targets are on the EW chart.
Alternatively, IEF will rally.
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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This analysis is part of Weekly Series – US Indices, Cryptocurrencies, Commodities, Currency, and some Large Cap stocks – that can be fully viewed here. Most analyses require subscription.