With the yield curve having already collapsed below pre-Trump-election levels, all eyes are on the 10Y Treasury yield and a crucial support level that was hit today that may divide hope from reality.
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And, as Bloomberg reports, the benchmark 10-year Treasury yield fell Tuesday to as low as 2.31 percent, within a basis point of its 2017 low. In the process, it broke below its 100-day moving average by the most since September and breached a key Fibonacci retracement level for the past year. It’s looking like the peak yield levels from December and March may be a “textbook double top,” according to Ian Lyngen at BMO Capital Markets.
Goldman Sachs suggests the level to watch now is the Feb. 24th low at 2.308%. Anything below this pivot, even on an intraday basis, signals that a meaningful top was put in at the March high. It basically means that this cannot be waves i and ii of an incomplete v/5 but actually the initial stages of a corrective process. Assuming this is the case, that the market has in fact completed 5-waves, the correction should last around one third of the time it took to form 5-waves; in other words until around mid-June. As is always the case, corrections are messy and often difficult/overlapping. Ultimately looking for a three wave ABC process before continuing the underlying (up)trend. In terms of levels, the next big pivot below 2.32-2.305% is 38.2% retrace down at 2.127%.
Downside risks heighten below 2.308%. A break would open a period of corrective price action, which could last until mid-June. Next support 2.127%.