Interest Rates

Being a trader for as long as I have been, provides me with a sense of historical significance not possible for newcomers to market speculation. I distinctly remember the high-interest rate periods of the 1970s and early 1980s. In fact, I remember the day the top of yields (and bottom of futures) was confirmed by the completion of a large symmetrical triangle (see chart). I remember the day this triangle was completed because I bought the upside breakout in futures. The completion of the H&S bottom on the weekly yield chart now completes the cycle that began in Aug 1982.

Fast forward to today, the decline below 141^27 on the daily continuation graph completed an H&S bottom failure pattern with a target of 135^11. The daily chart of the Dec 2018 contract is also shown (with resistance at 139^24 and a target at 135^20.

Our friends at Nautilus Capital produced an interesting graph this past week showing that the yield curve of U.S. treasuries is turning up from a cyclic low. This implies that yields at the long end of the curve will advance faster than yields at the short end of the yield curve. 

A Generational Low?

Two chart observations are worthy of note. First, the advance this past week in yields completed a 4+ year H&S bottom on the weekly chart with targets of 4.37% and 5.03%. Second, the advance this past week also penetrated the upper boundary of a multi-decade channel. It is my belief that an Interest Rate Generational Low has been confirmed in yields.

Weekly

Monthly