Interests Rates are at Critical Levels

Now that Syria is taking over the news, interest rates and bonds have taken a back seat in the financial media. But for us market participants, this is still front and center. If you watched this weekend's market video that I did with Phil, or follow me on Stocktwits or Twitter, you know that I've been really vocal lately about the potential bottom in bond prices. But today I want to focus on rates.

This is a chart of the 10yr Treasury Note Yield Index. We're looking at candlesticks that show yields are retesting what was formerly key resistance throughout the summer:

The problems I see are 1) the quick reversal lower after the new highs last week and 2) the momentum divergence that developed on those new highs. As yields took out resistance, the relative strength index made lower highs. That worries me.

In addition, we see crazy bearish sentiment in Treasury Bond prices. These are the kinds of numbers that we've seen consistently at peaks in yields; most recently in early 2011 and mid 2009.

For confirmation, we want to see a weekly close in 10yr yields below 2.7%. With rising 20, 50 & 200 day moving averages, there is no doubt that yields are and have been in a bull market. But so were stocks just a few weeks ago right?

Stay tuned...

Tags: $TNX $TLT $ZB_F $ZN_F $TBT