Where Are Bonds Going?

This is a big question that I ask myself when I walk into work every morning. What are we going to do with Treasury Bonds? I mean, they’ve been a short since they broke down late last year. But what about now?

Here is a chart of US Treasury 10-year note yields. The rally in yields continued through the end of January in this nice clean uptrend channel stalling right around the 61.8% Fibonacci Retracement of last year’s decline. Notice the RSI divergence in the summer that helped kick-start the move.

2-13-13 TNX

It’s interesting that, last summer, we saw similar bullish divergences in Stocks, Euro, Precious Metals and a bearish divergence in the US Dollar.

I think if you get the bond trade right, it should help the others fall into place. The question here becomes, do yields stall here at this key Fib retracemenet level and break trendline support? Or has this 2 week consolidation been the rest before the next move higher in yields?

This is going to be a big one to watch