The last time we did any heavy lifting on bonds was back on March 7, when it seemed to us that prices had topped out and yields had bottomed. ZN had broken down from a rising wedge and was meandering towards the bottom of a long-term rising channel.
We saw more downside ahead, but wondered what was taking the “significant retreat” first called on January 21 so long. Mar 7 marked the bottom of a 1st of a 3rd wave down, retracing nearly .886 of that wave by May 1 before things got rolling.
Since then, the retreat has been quite significant, dropping from 133’250 to 123’205 over the next four months and plunging right through the bottom of the rising channel. From all appearances, we’re backtesting the channel — probably at its intersection with top of one of the two potential falling channels.
Even if TNX does continue to hold the rising white channel, it offers plenty of range. A bounce at 2.14% around December 4 would represent a .618 retrace of the latest rise. While, a push higher to, say, 3.2% in late October would flesh out the big falling white channel.
With QE tapering (if/when?) and another debt ceiling battle looming, neither is out of the question. My crystal ball on those issues is more than a little cloudy at the moment. So, we’ll continue to watch these key Fib levels and channels and let the market tell us which way it’s going. In the end, price is the only indicator that matters.