BofAML Warns Bond Bears: "These Levels Are Not Going To Give Way Without A Fight"

Tyler Durden's picture

While BofAML's Macneil Curry remains a longer-term Treasury bear, in the near-term (and potentially medium-term) the evidence for a pause and corrective yield pull-back is too much to ignore. Given the momentum conditions, he notes, these levels are not going to give way without a fight - Treasur bears beware. He also fears a correction lower in EURUSD and USDJPY (JPY strength) but worries that gold has further to fall.


Via BofAML's Macneil Curry,

US 5s & 30s at MASSIVE, LONG TERM SUPPORT. Bears beware

We are long term Treasury bears, with 5s targeting the Feb’11 highs at 2.42%, 10s targeting 3.45%/3.50% and 30s targeting 4.23%/4.25%.

However, in the near term (and potentially medium term) the evidence for a pause and corrective yield pullback is too difficult to ignore. While momentum has not confirmed this most recent yield advance from the Oct lows, it is the SIGNIFICANT LONG TERM SUPPORT LEVELS, particularly in 5s and 30s, that have our attention. Indeed, 5s are right on 4.5yr trendline/channel support at 1.756%/1.775%, while 30s are just shy of 20 year channel support and the 100m average at 4.05%. Indeed, monthly momentum in 30s has reached oversold for the 1st time since 2000.


Key resistance for each point on the curve is varied. For 5s, a correction could come in the form of a 1.775%/1.659% range, but if 1.659% goes, we risk a 11bp decline. In 10s, stops are likely below 2.935%, through which confirms a top and turn lower to 2.88% and below, while in The Bond bulls need a break of 3.762% to confirm a top, exposing a push to 3.563%/3.461%.

Turning to the curve (5s30s) we hold a near term neutral bias within the 230.9bps/204.9bps, preferring to fade the range extremes. However, on a long term basis, the trend is for FLATTENING, with a break of 205bps/195.1bps opening retracement support at 146bps and below.

€/$ in trouble, but $/¥ is at risk as well.

Ahead of event risk, evidence continues to build for a lower €/$. A daily close below 1.3581/1.3548 (6m trendline & 100d average) confirms a turn lower, exposing the 200d (now 1.3335) and below.

Meanwhile, we remain very cautious on $/¥, as the 3m uptrend is increasingly vulnerable to a top and reversal. The bearish daily momentum divergences and completing 5 wave advance from both Feb’12 and Oct’13 says that additional strength is limited before a top and turn.

Given the strong correlation between $/¥ and US 10yr yields; a break down in yields could be the catalyst for such a reversal. 103.74 (May’13 high) is key support. A sustained break below confirms the turn, exposing the 200d at 99.70 and likely below.

Gold remains in trouble

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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Xibalba's picture

I remember getting a gold ring made a few years back.  The jeweler was trying to tell me the price was too high and I should wait.  Spot was 600 and the jeweler was Little King in the East Village.  The shop is closed now. 

vote_libertarian_party's picture

Said another sell off in 3...2...

disabledvet's picture

"hahahahaha. you traders don't have any mooooooooney! hahahahahaha." hmmm, from the "Naked News" to the "Non-news" eh papa-son? "Fukushima, the Arab meltdown, Russia all in on Assad, Bakken Shale revolution, Venezuela hyper-inflating, two speed euro, the India rupee has collapsed and Indoneisan rupiah hanging by a thread, meltdown in Australia..and the loonie getting crushed." oh, and all the zombie banks have now taken out the competition for me?

Carpenter1's picture

Bulls have lost billions in the last 9 months, now they're going to dump billions in trying to push the trade back? The depths of delusion will one day be fully revealed and the end of these bubbles will be the final, soul crushing blow for many traders.

Gringo Viejo's picture

The Fix Is In! (until it's not)

Fuh Querada's picture

does anyone believe this technical analysis shit?
Blank off the right third of each chart, tell us what your predictions were at that cutoff point and compare them to what actuallly happened.

House of Medici's picture

Not sure about "anyone", but the traders causing these head and shoulders to happen do.  That's all that matters to them with their intraday hedges and gain/loss marking.

Boston's picture

Actually, in this case, these guys called it right.

Just look back one and two weeks ago, right here on ZH, and this BAML group has been warning of a pullback in yields...several times. 

Of course, nobody here believed them, but that's not their problem!

Rainman's picture

exactly, the 10y yield at 3 is the Alamo being defended against all who come over the wall.

Big Brother's picture

Good memory.  I was thinking the same thing and did a search:

I look at pullbacks as an opportunity to further short yields.  Looking at the previous post, 2.76% appears to be a good location to add.

NoDebt's picture

Great.  More technical chart analysis on the most manipulated asset class on the planet earth (gold wins by percentage, perhaps, but TSYs win by sheer volume).


Stoploss's picture

Why does a gold chart and the JPY chart match exactly?

Yen pops today as does metals. Yen drops tomorrow as does metals.

I left my rocket science book somewhere an can't find it..

Silverhog's picture

Who gives a shit what he thinks about Gold. Bet he does not own one physical ounce except his Rolex. 

ebworthen's picture

Nothing that Cap'n Yellen and $150 Billion/month of QE can't fix.

The FED's mandate now includes anything and everything to prop equity valuations and keep rates low.

They will blather and hem and haw but they have only one response and that is QE of one stripe or another, to infinity.

Spungo's picture

So the tea leaves are saying buy bonds? I'll get right on that.

Itch's picture

I never hear any of these pricks talking about whats actually happening....CAD getting smoked!!! 

CrashisOptimistic's picture

If you think bond yields are going up, you think the economy is buoyant and vibrant, because that's what drives yields up.

Who thinks this?  More important, what do they think has changed that must reverse a 30 year trend of declining yields?

Big Brother's picture

I went short at 1.3605 after the ascending trendline from July-Dec 2013 was pierced.  Also, though not posted here, a lot of retail is starting to flip and go long EURUSD.  We'll see if it drops to 1.3200 over the coming weeks/months. 

Just_Another_User's picture

 trendlines, moving averages, elliott wave, rsi, gann, s&r etc... is there anything pc of technical analysis this person didnt use? oh wait - I dont see any fib levels.... its all bs anyway. if one sold eur/usd off an ascending bat-bullshit pattern (or any other 'technical' pattern) & you made $ - u got lucky. period-point blank.

when you own the mkt - the only reason you need technicals analysis is to use those patterns against 'traders' who do use em. 90% of traders fail, footing the bill for the 10% who succeed yr after yr, after yr. after yr.

if you dont have the $ to make prices move in the direction that you want them to go, then your a slave to the people who do & theyre out there, doing it - everyday.