Trading The Technicals: Bond Bears Beware Of "Defensive Posture"

Tyler Durden's picture

The combination of impulsive gains and corrective weakness from the late October lows at 78.99, repeated failure to hold a break of 79.95/79.82 area support and now bullish seasonals (January is the strongest month of the year for the US $ Index) all tell BofAML's Macneil Curry that the US Dollar Index is headed higher. While he remains a long-term Treasury bear, Curry warns bond bears to take a wait-and-see approach and fears a "defensive posture" may correct bond yields and stock prices lower.


Via BofAML,

Bullish US $ Index as 2014 starts.

We remain US $ Index bulls.

The combination of impulsive gains and corrective weakness from the late October lows at 78.99, repeated failure to hold a break of 79.95/79.82 area support and now bullish seasonals (January is the strongest month of the year for the US $ Index) all say the US $ Index is headed higher.

A closing break of 80.66/080.83 confirms (100d and Dec-20 high), opening the Nov highs at 81.48, ahead of 82.67 and beyond. Further supportive of a higher US $ would be a £/$ close below 1.6474 (Dec-31 low), which would result in a Bearish Engulfing Candle, and a €/$ close below the Dec-20 low of 1.3625, which would complete an irregular Double Top formation.

US Treasury yields trying to break out, but watch the S&P500

We have been and remain long-term US Treasury bears, with 10yr yields targeting 3.17%/3.30% and, eventually, 3.45%/3.50%. HOWEVER, right here, with 10yr yields struggling to maintain the break of 3.00%/3.012% support (61.8% of the Apr’10/Jul’12 decline and early Sept. highs), we are NEUTRAL, taking a wait-and-see approach. Indeed, the risk for a near-term and, potentially, medium-term yield top and turn lower is quite high. Watch 2.970%/2.965% resistance AND ESH4 support at 1833.50/1824.50. Through these levels would say that 10yr yields have formed a near-term top and bullish turn in trend, as investors adopt a more defensive posture and ESH4 enters into a near-term correction within the larger bull trend.

Bigger picture, ESH4 bears need a break of 1768.25/1754 to gain control.

Gold weakness to continue

Despite the rally in the US $, gold has proven to be very resilient. However, stay bearish against 1251/1270. Against here, the downtrend remains on firm footing for a test and break of the Jun lows at 1180, opening LONG-TERM PIVOTAL SUPPORT BETWEEN 1127/1087

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NoDebt's picture

Long way around the barn to say "Got no freaking clue what happens next."

VD's picture

gold looking like 1150 true resistance, then buy next round...

Dr. Engali's picture

The ten year will go to where ever Yellen wants it to go, even if she has to buy up the whole damn issue to get it there.

Rainman's picture

exactly, printing and spending are one and the same to all liberals....housing will be preserved at any cost.

derek_vineyard's picture

the 10 year will go wherever jamie wants it go

Racer's picture

Technicals? Are they in the same redundant box as fundamentals?

orangegeek's picture

in simpler terms, a strong USD will drive commodities and US market indexes lower (based on them being priced in USD)


PMs are the exception - they have moved early and have already made their move down


so what says the USD will move higher?


and we have a topped Euro, GBP and CDN - JPY has already tanked

akak's picture

To claim that the US dollar will be or is "going up" is to narrowly, and incorrectly, focus on one end of a continually bouncing teeter-totter .... which is mounted on the deck of a sinking ship.

No fiat currency EVER 'goes up', at least not in real value (purchasing power).  Claiming otherwise is ignorant at best, if not actually disingenuous.  To measure one depreciating currency against other simultaneously depreciating currencies is simply meaningless and idiotic.

Fuh Querada's picture

tell that to Mr "Fuc to Market".
(I up-arrowed you)

akak's picture

No shit! 

Marc to Stupidity is just the latest ZH token retard and current pro-status-quo, anti-gold, pro-Establishment shill, following in the illustrious footsteps of RobotLemming, Leo Kissmyasskis, and Robert Bruschetta.

realWhiteNight123129's picture

Yes a correction is in the card on the fall of TSY. Waiting for that to short. A bear market rally is overdue on TSYs.


As for Gold, there is no Gold per se, only Gold/USD.

What is backing the USD base money at this point? TSYs and MBS, normally the USD should be in tailspin if it was not used as reserve currency.

As for Senkaku Islands, which before were held by a private individual and thereafter acquired by Japan making it an encroachement of Japan close to China, does anyone believe that this encroachment would have been done without the support of the US?


If China starts to disloge the dollar from South Asia trade, welcome to real trouble with the USD because the crappy nature of the "assets" backing the base money would become blatant.


SheepDog-One's picture

Bottom line is the FED will do whatever it takes to do whatever it is they want.

Soul Glow's picture

The gold chart looks like the yellow stuff should bounce nicely here and continue its huge run up.  The dollar?  I don't know short term but the long term chart looks weak - there are head and shoulders everywhere.  Stock is an overcrowded trade, nevermind that all of the corporations have been lying like Enron on their earnings and revenue for years.  

Yen Cross's picture

   Time to put the 'Ouija Board' away guys (BofA analysts), the holidays are over.

Fuh Querada's picture

What a frigging chart masturbator. Now mask off the right third of all of those charts and tell us what your predictions were then, compared to what actually happened.

devo's picture

3+% yield on a treasury vs 3-5% on a quality dividend stock? Risk/reward favors the treasury now. The FED is trapped. Seems their "exit strategy" is to find the sweet spot and sell these bonds while not crashing stocks.

devo's picture

Regarding gold, if everyone and their mother thinks there's a capitulation to 1050 and everyone anticipates that, does it actually happen? Just like 2k on the upside never happened because everyone expected it. I mean, if you want to short gold to 1050 do it already, people, so it can resume the bull market. Jeez.

OC Sure's picture

For the 30yr Bond, pessimism coincides well with the extreme bullish sentiment in stocks. Beginning in mid November the c/p ratio has been below .80 for 5 weeks in a row. That is rare. Sentiment in long rates is now extremely bearish. 20 points higher, earlier this year, the ratio indicated extreme optimism at the end of April, mid-June and again at the end of July. Bonds are most likely bottoming in here and are a better play on the buy side as this area is a fall back to the apex of the monthly triangle from the end of 2008 to mid 2011. Look for extreme optimism before being a better seller again. Maybe when the headlines claim why long rates just have to go down instead of up?