Two-Year US Treasury Note Flashes “Sell”

From the Desk of Ian Culley @IanCulley

I bought bonds last December and again in March.

I thought it was time to bring these beaten-down assets back into the fold as US Treasuries printed fresh six-month highs.

But I was wrong. 

Fast-forward to today, and the downtrend for bonds remains intact.

And those false breakouts last spring have led to fresh breakdowns as we head into the fall.

The 10- and 30-year futures are flashing sell signals as they undercut their respective March pivot lows.

Now, the shorter end of the curve is doing the same.

Here’s the two-year Treasury note completing a bearish continuation pattern:

The momentum profile alone reveals sellers control this market with two oversold readings since May. I imagine we’ll witness a third on a valid breakdown below 101’09.

That’s my level – the March pivot low.

The two-year is a short on a decisive close below the former low with a measured target at approximately 98’25.

You certainly don’t have to take this trade.

If shorting bonds doesn't work for you, just don’t take the trade.

But I don’t understand the urge to buy Treasuries down here.

Whether we’re looking at the 30-, 10-, five-, or two-year bond, I can’t find a single chart I want to buy.

Plus, I’ve tried.

Twice!

Neither trade worked.

I’m sure buying bonds will eventually make sense.

But now is not that time.

Stay tuned!

Thanks for reading.

Let us know what you think.

And as always, be sure to download this week’s Bond Report!