The Benchmark 10-year Treasury note yielded 3.76 percent last month, up from 3.43 percent on March, this is a spread rise of 9.6% (its’ biggest rise in 48 months) all due to speculation that the Federal Reserve rate-cutting campaign might be nearing an end, this help revive the sagging dollar and fuel the strong rally in the stock market that sent Dow Jones Index sharply higher 4.5% month-on-month.
However, traders are advised against counting out a potential rebound in Treasury prices (prices and yields move in opposite direction), because technically the bond market has yet to take-out key 21 years old downward resistance line and this is a precursor to a trend change.
The recent ’03 to ’07 bull market run on Wall Street, bond yields enjoyed the same boom as it broke out from its’ 21 years old downward resistance line but during the last leg of its’ bull run it formed a small bearish double top reversal pattern. And a broke-down from this bearish top pattern ended the bond market 4 years rally and eventually sent yields back below its’ downward resistance line.
Suffice to say, traders would want to see bond yields broke above its’ historic downward resistance line and more importantly consolidate above this downward resistance before it take-on its’ double top neckline resistance. Otherwise, failure to do so may soften the rally both in the US Dollar and the stock market.
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