The good news is that TNX tagged our next upside target this morning — the neckline of a fairly large IH&S Pattern that we first detailed back on Jan 9 [see: China – It’s Not Me, It’s You.] The bad news is that this isn’t shaping up as a clean reversal.
To see why, we must examine DXY — which also isn’t shaping up as a clean reversal. Recall that DXY tagged our downside target range last Thursday [see: US Dollar – Capitulation.] It was a precise tag of our range (88.438 versus 88.423-88.682) but it stopped just short of an important channel bottom.
Likewise, TNX has resistance just overhead that could come into play in (a) an overshoot, (b) a reversal and later thrust higher, or (c) never. Fortunately, the upside potential from here is relatively limited, enabling traders to get out ahead of it. Ignoring cries of “the sky is falling” might prove to be the tougher challenge.
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