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September 20, 2016

LEVELS WE ARE WATCHING (Sep 20 2016): WTI

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Market Commentary │ September 19, 2016

Tuesday snapshot: Bullish signs on AsiaUSD Index -

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As equities and commodities have stabilized and begun to turn back up, we see better performance in local market currencies. Over the past 24 hours we saw a bearish outside day on USDKRW and USDTWD. On the broader Asia-USD Index we saw a bullish daily reversal off key levels. Important resistance ahead is at 108.36-108.62. A rally to there is likely and a break above would indicate further gains for Asian currencies from a more medium term perspective.

The ADXY Index held the 76.4% Fibonacci retracement against the June low which came in at 106.46 There we posted a bullish daily reversal yesterday indicating an end to the short term correction down. The pivot of this setup, the channel top, and the reverse head and shoulders neckline all converge between 108.36 and 108.62. A firm break above those levels (preferably weekly close above) would amount to a significant bullish development. The medium term reverse head and shoulders pattern has a target of 113+. Interim resistance is at 110.74.

20 September 2016

Fixed Income Daily Key Themes •

Chart of the Day: 2s10s US bond curve has steepened up to more important resistance at 97/100bps – the 23.6% retracement of the July 2015/16 flattening and falling 200-day average. We ideally look for this to cap and turn the trend flatter again.

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10yr German yields focus remains on price resistance at -.02/-.03%. Only a break through here can remove remaining bearish risks and turn the trend bullish again for -12%/-.13%. Bunds remain capped below “neckline” resistance at 164.22. 10yr UK yields continue to hold support at .97%. Extension through here is needed to see further weakness to 1.00% then 1.08/12%.

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10yr US Yields remain trapped in a sideways range just ahead of more important support at 1.77/80% - the “Brexit” yield highs and the falling 200-day average – where we continues look for fresh buying to emerge. 30yr US yields attention remains on a cluster of retracement supports at 2.50/53% where we ideally look for fresh buyers.

highs and the falling 200-day average – where we continues look for fresh buying to emerge.

Flat, buy at 129-30 stop/reverse below, 129-17 for 130-22. Below 129-17 can see further weakness to 129-055/025. 30yr US T-Bond

**December** Contract

2s10s US bond curve - Daily

10yr US T-Note

**December** Contract

The T-Note remains deadlocked sideways for now. The T-Note has seen a softer start to the week and is pulling back into current range. Support moves to 130-06/035 with a break below 129-26 needed to test 129-23/17. We would look for an attempt to hold here, but below it can aim at the April/May 2016 lows at 129-055/025. Resistance moves to 130-195 with a break out above the 13-day average and price resistance at 130-22/29 needed to ease reaming downside risks and see further strength to 131-06/085 with tougher resistance pegged at 131-16/22 – the early month high, 38.2% retracement of the July/September fall, falling 40-day average and trendline resistance from July. 10yr US yields remain trapped in a sideways range just ahead of more important support at 1.77/80% - the “Brexit” yield

T-Bond remains under downside risks, while capped below 167-14/18. The T-Bond currently remains trapped in a tight range just above the rising 200-day average now at 165-06. However, while capped below price/13-day average resistance at 167-12/18 downside risks remain in place. Support moves to 165-14 then 165-06 ahead of the 164- 17 low. Removal of the latter level is needed for a move down to 163-22/17 with firmer levels seen at the 50% retracement of the June 2015/July 2016 rise at 162-105. Resistance moves to 166-19, then 166-27 with a break above 167-12/18 needed to set a base for 168-29/169-00. 30yr US yields attention remains on a cluster of retracement supports at 2.50/53% where we ideally look for fresh buyers.

Flat, sell at 167-06/09, stop/reverse above 167-23 for 164-20. Above 167-23 aim at 168-03 then 168-29/169-00. 20 September 2016

Equities Daily Key Themes •

Chart of the Day: S&P 500 Utilities index has held and bounced from key support at 245/44 – the 38.2% retracement of the August 2015/July 2016 rise and the rising 200-day average. Follow through above 254 is needed to confirm a base and above

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257/60 to turn the trend higher again to retest 268/69. S&P 500 (Dec) immediate risks stay higher in the current range with key near-term resistance showing at the “neckline” to the recent top at 2155/62. Russell 2000 has extended its recovery from the rising 63-day average now at 1208. Euro Stoxx 50 (Dec) risk can stay lower whilst capped beneath price and the 38.2% retracement of the September decline at 2976/79. FTSE 100 (Dec) has completed a small base, suggesting a recovery for 6813/18, then 6885/902 where strong selling is expected to show. Nikkei 225 continues to hold above a key support zone at 16380/280 ‒ the late August low, 63-day average and 38.2% retracement of the June/September rally. Shanghai Comp remains under pressure, but a clear break below 3003/2995 is needed to see further weakness for the 50% retracement at 2961/57 at first, ahead of solid support at 2945/22.

20 September 2016

FX Daily Today’s highlights: • • • • • • • •

EURUSD is holding above the late August low and 200-day average support at 1.1149/23. EURJPY has completed a small top, leaving the immediate risk lower for 112.79 initially, ahead of 112.47/32. USDJPY below the recent range lows at 101.42/21 is needed to see weakness for 100.62/56 initially. EURGBP above .8590 is needed to see strength for a retest of the .8706/25 highs. GBPUSD's immediate risk stays lower for 1.2979, followed by potential trendline support at 1.2927. USDCAD's spotlight stays on the July 2016 peak and 200-day average at 1.3253/58. AUDUSD has found an initial cap on the approach of the 55-day average at .7578. NZDUSD above .7332 can see a small base for a move back towards .7365.

Today’s trades/positions: • • • • • • • •

EURUSD: Long at 1.1160, stop/reverse below 1.1123 for 1.1280. USDJPY: Short at 103.90/99, stop/reverse above 104.47 for 100.10. GBPUSD: Short at 1.3080, stop above 1.3140 for 1.2940. USDCHF: Flat. Sell at .9850, stop above .9886 for .9710. AUDUSD: Flat. Buy at .7500, stop below .7475 for .7610. NZDUSD: Long at .7260, stop below .7232 for .7395. USDCAD: Short at 1.3240, stop above 1.3268 for 1.3085. EURJPY: Reversed to a short at 113.79, stop above 114.50 for 112.45.

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EURGBP: Long at .8460, stop below .8394 for .8700.

Mon 9/19/2016 8:14 AM

GS Techs: Quick Update *Levels* SPX (2,139) – Corrective to 2,164. Gap resist. 2,180

US10s (1.69%) – Next 1.747%. Break allows ~1.826% US30s (2.44%) – Exhaustion. Above ~2.62% to base Bunds (.014%) – Sup. -.019/.03. Corrective < 0.108% WTI (43.21) – Focus on 41.39/ 40.81. Watch for sup. EURCAD (43.66) – Held an ABC at 1.49. Bias < 1.45 USDCAD (1.32) – Testing ABC 1.32. Thick to ~1.3312 EURGBP (0.8555) – Thick 0.8575-.8634. Bias to hold GBPUSD (1.3050) – Sup 1.2973-27. Fade 1.319-1.325 EURUSD (1.1165) – 200-dma 1.115. Impulse < 1.1086 USDRUB (64.58) – Triangle sup. 63.75. Chase break USDMXN (19.59) – Next up 19.92. Hold above 19.285 USDZAR (14.00) – Focus 13.68. Add t/side if reached TRYZAR (4.704) – Focus 4.615. Add t/side if reached

19 September 2016

Technical Weekly – Fixed Income TNote

more pronounced rebound in the next few trading sessions towards 166.24 (9-day moving average), a major obstacle before the resistance at 168.23 (weekly Bollinger moving average). There will need to be a breakout above this last level to overcome the descending channel in evidence in the daily chart, opening the way for a pronounced recovery towards 170.04 (Fibonacci projection) before 173.01 (upper band of daily Bollinger). Supports are located around 164.18164.20, at 162.12, at 161 and at 158. 

Watch out for a rebound towards 166.24, a major obstacle before 168.23. It will take a breakout above this last level to overcome the descending channel in the daily chart, with a new target at 173.01.

Given that daily volatility has stabilised and the daily stochastic has turned bullish, watch out for rebounds towards 130.25 (daily Bollinger moving average), the last obstacle before the resistance at 131.06 (daily parabolic). It will take a breakout above this last level to overcome the short-term downward bias, opening the way for a lasting rebound towards 131.19 (upper band of daily Bollinger) before 131.30 (weekly parabolic). Supports are located at 130, at 129.24, at 129.12 and at 129.02. 

Rebounds are expected, but it will take a breakout above 131.06 to overcome the underlying downward bias. TBond

The support around 164.18-164.20 has held firm and daily volatility has stabilised. In addition, the daily stochastic has turned bullish and the weekly stochastic is in oversold territory. These different factors point to a

Daily Pivots – September 20, 2016

LEVELS WE ARE WATCHING (Sep 19 2016):

Sep 10 16 15:02 GMT

Weekly Review and Outlook Stocks Tumbled, Yield Surged on Revived Fed Hike Speculations, Dollar Strength Limited

…Technically, the developments in stocks and yield

were significant. DJIA's strong break of 18247.79 support completed a small head and should top pattern which confirms short term topping. More importantly, bearish divergence condition in daily MACD argues that rise from 15450.56 has completed at 18668.43 too. Deeper decline is expected in near term to 38.2% retracement of 15450.56 to 18668.43 at 17439.20. The real test lies in 17063.08 support and sustained break there will raise the chance of medium term reversal.

…10 year yield broke out from range that started

back in July to close strongly at 1.672. It should also be noted that firstly, TNX should have finally conquered 55 days EMA as resistance. Secondly, the medium term falling trendline was also taken out. Thirdly, bullish convergence condition is seen in daily MACD. Fourthly, the decline from 2.489 is apparently in sharp of terminal triangle. Thus, it's likely that the trend is reversing in TNX. 1.89 resistance will likely be tested.

.03 above that bearish trendline from Jan (limited risk). However, with the downside likely rangy and part of a larger bottoming (see longer term below), will want to get more aggressive on nearby weakness to maintain a good risk/reward in the position.

Sep 01 16 04:03 GMT

US 10Yr Yield, Did Reverse Lower From That 'Pivotal' Resistance US 10Yr Yield, Did Reverse Lower From That 'Pivotal' Resistance

Near term US 10 year note yield outlook: In the Aug 25th email, affirmed the viewed of gains above the July 21st high at 1.63%, but warned that the 'pivotal', longer term bearish trendline from Jan was just above there. The market did indeed break above 1.63% the next day, reaching 1.64% (testing that trendline from Jan) and before quickly reversing back below. Lots of negatives argue a top and with potential declines back toward that Jul 6th low at 1.32% and even below (but as part of a longer term bottoming, see longer term below). Note that the failure/false break of that July high at 1.63%, potential completion of the 3 wave (A-B-C) rally from the Jul 6th low, stalling technicals and the seasonal chart that is lower into the end of the year (see 3rd chart below) all add to this top view. Key resistance remains at the long discussed 'pivotal' bearish trendline from Jan (currently at 1.63/67%, break/close above would argue that a more important low is already in place, and that Jul high). Nearby support is seen at the bullish trendline from early July (currently at 1.53/55%) and 1.43/45% (Jul 29th low, 62% from the 1.32% low). Bottom line: remaining below that key, bearish trendline from Jan argues declines back toward 1.32% as part of a larger bottoming. Strategy/position: With potential of that topping, would sell here (currently at 1.58%) and initially stopping on a close

Long term outlook: No change in the long term as the market is seen in process of an important bottoming (for at least 6-9 months) after finally achieving that very long term target (years) below the June 2012 low at 1.38% (reached 1.32% on July 6th). Lots of long term positives add to the larger bottoming view and include the false break of that 1.38% low, bullish technicals (see bull divergence/buy mode on the weekly macd), and potential completion (or nearly) of the 5 wave decline from at least the Jun 2015 high at 2.50% (wave V). However as been discussing, there remains scope for a more extended period of basing as part of the process (see in red on weekly chart/2nd chart). Key resistance remains at that long discussed, 'pivotal' bearish trendline from Jan, as a break/close above would greatly increase the likelihood that a more significant low in price is finally in place. Bottom line : a more major bottoming is favored (low for 6-9 months) but with scope for a more extended period of ranging/basing as part of the process. Strategy/position: With the market still below that 'pivotal' trendline from Jan and potential for further lows, would also switch the longer term bias to bearish here (currently at 1.58%) and then using the same exit as the shorter term above (limited risk). Though substantial declines from here are not favored (versus limited downside as part of a larger term bottoming), there is the potential and would prefer to make that reassessment from a position of strength/lower levels (assuming the nearer term declines). Current: Nearer term : resold Aug 31 at 1.58% and stopping on close .03 above that pivotal bear t-line from Jan. Last : resold Jun 22 at 1.69%, took profit Jun 23 above top of wedge (1.38% for .31 profit). Longer term: bear bias Aug 31 at 1.58%, but downside likely part of a more major bottoming. Last : bullish bias Aug 5th at 1.57% to neutral Aug 10th 1.51%.

SEPTEMBER 13, 2016

[Chart Of The Week] The Bullish Island Reversal In U.S. Interest Rates Over the last few years, all we’ve heard from the financial media and economists are how we’re in a “rising rate environment” and interest rates are going up. They keep averaging down on their irresponsible calls because they can. They have no skin in the game. They don’t care about making money in the market. The media wants to sell ads and who knows what economists are thinking. As the great Warren Buffett said last year, “Any company who has an economist has one employee too many”. Meanwhile U.S. 30-year yields hit new lows in July proving all of their forecasts to be incorrect (shocking I know). And there is probably a good reason for that. They obsess over what the federal reserve people are saying, and blatantly ignore price action. Rather than focusing on what pays, they instead choose to focus on gossip from a group of people who never stop talking, literally. U.S. Treasury Bonds have been a short for months (see here), but do we press these shorts or take profits? Today we’re looking at what I think is an extremely powerful development over the past week: This is the 30-year US Treasury Bond Yield completing a bullish island reversal over

the past few days. This suggests that 30-year yields are going much higher:

The way I see it, we can move our stops in bond shorts and now only remain short long-term bonds if yields are above the upper end of this “island” (circled in green). Here we’re looking at the same 30-year yields but taking it back a little bit further. You can see the early 2015 support near 2.22% and the brief breakdown in early July below those lows. But notice how quickly they came back:

This Chart Has Suggested Selling Bonds Since June We don’t have to make things complicated guys. We don’t get paid to tell stories and make up reasons for why the market is moving during the day. We are market participants. We are the 99.99% of people in the world who are just here to try and make a profit. We don’t have to put together a pitch, or a sexy headline, or ask our boss for permission to do things. We just want to make a buck when the market moves. That’s it. So while all those people out there pretending to be mother goose are making up stories about the fed and inflation and all sorts of noise, we prefer to focus on price, which is literally the only thing that will ever pay anyone in this business. Today we are looking at the chart that has suggested since June that selling Treasury Bonds was the right move, and therefore interest rates would rise. Here are 30-year Treasury Bonds going back to the early 90s. When the price of bonds gets to the bottom of the channel, it’s a buy. When prices get to the top of the channel, or in this case, slightly exceeded it, we want to sell bonds. From failed moves come fast moves in the opposite directionand that’s precisely what we have here:

After recovering and recapturing that support in mid-July, 30-year yields consolidated in a sideways range for virtually two months and then resolved higher. You can’t argue with results. The battle between supply and demand came to an end and the resolution was higher. I think as long as yields are above this JulySeptember range, we have to continue to be short bonds. It’s been working beautifully and I see no reason for this to change any time soon. The only difference is we want to lock in profits from early August and adjust our stops. SEPTEMBER 9, 2016

I’m not sure why some people like to complicate things. I prefer a keep it simple stupid approach. If 30s are below the upper of the two parallel trendlines defining this channel since the early 90s, we want to be net sellers of U.S. Treasury Bonds. Members of All Star Charts have been getting this data and conclusions for months already. The trade has been working and I believe it will continue to work moving forward.

Bonds Are Confirming The Risk Appetite For Stocks SEPTEMBER 8, 2016 BY JC

With all of the major U.S. Stock Market Indexes hitting all-time highs, I think it’s important to see if the bond market is telling a similar story. Are bonds confirming the risk appetite we’re seeing towards stocks or is there a divergence? Based on my work, bonds suggest there is plenty of risk appetite out there globally and therefore stocks should continue higher. Today we are looking at a ratio chart of High Yield Junk Bonds vs Investment Grade Bonds. The vehicles we are using to compare are the Markit iBoxx USD Liquid High Yield Index Fund ($HYG) vs the Markit iBoxx USD Liquid Investment Grade Index Fund ($LQD). Earlier this year, the ratio completed its multi-year downtrend when it fell to support from March of 2009. If you recall, this was the bottom in the S&P500 after the historic 2008 crash:

[Chart Of The Week] Are U.S. Treasury Bonds A Short Up Here? U.S. Treasury Bonds have been in a beautiful uptrend for 35 years. This is nothing new. But within uptrends, we often see severe corrections that have presented very favorable risk vs reward opportunities in the past. I think today is one of those scenarios. Here are the details: This week we’re looking at a multi-decade chart of 30-year U.S. Treasury Bonds. As you can see they have traded within a very clean uptrend channel since the mid-90s. This month prices exceeded the upper of the two parallel uptrend lines defining this channel and it appears to be failing. Also notice the bearish momentum divergence at these new highs:

From a sentiment perspective, this is where things get interesting. We look to the Commercial Hedgers as “the smart money”. The latest C.O.T. report shows hedgers are near their most net short 30-year Bonds position since 1998, just before bond prices fell 20%.

…As long as this ratio is above the downtrend line

from the February highs, we want to be long this spread and confirms what we’re seeing in U.S. Stocks. If we start to break back down below it, then we’ll have to reevaluate this bullish thesis and maintain a more neutral stance in this ratio. From a risk vs reward perspective, the path of least resistance is higher and favors the bulls here.

AUGUST 3, 2016 BY JC

In addition, we look to see what the Speculators are doing relative to the Commercial Hedgers. When this ratio hits extremes, we take notice. Currently, with Speculators buying bonds at the fastest rate since 2012, this ratio is near historic extremes. Last time we were near these levels was July 2012, just before a 17% correction in 30-year bonds. Price suggests fading these levels. Sentiment certainly agrees with this thesis. We want to be short 30-year

bonds if we’re below the upper of the two parallel trendlines. In the ETF world, I still like shorting $TLT if we’re below $142 and taking profits down near 132 tactically.

Via Aug 15, 2016 2:10 PM

Another Buying-Panic Sends S&P Near 2,200 BofA Sees "More Room To Run", Targets 2,425 …Many investors have asked how long can “this rally” last. Historical data suggest that the rally from February may not be as stretched as some investors may think. The S&P 500 has had 96 rallies in excess of 10%, without a 10% drop, going back to 1928 with an average gain of 34.07% (21.52% median) and an average length of 7.8 months (2.7 median).

This overbought or complacent reading for the 25-day put/call ratio exceeds the levels from 2015 and is a risk factor. At the same time, we note Savita Subramanian's equity market projections: Our S&P 500 yearend 2016 target is 2000. Our target is currently based on a weighted combination of 1) our five factor framework, implying 2150, weighted at 70%, and 2) a 30% probability that the S&P 500 retests its recent lows near 1800 by year-end., giving us an official year-end target of 2000. And 10-year Target: 3500...

6 July 2016 Projecting the median and average returns off the February low puts S&P 500 near 2220 and into the 2400-handle, respectively. 2220 coincides with our tactical 2225 projection...

Rates and Macro Technical Focus Year-to-date FTSE underperformance – in USD terms •

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• But there is a potential problem...The 25-day CBOE total put/call ratio has dropped below the lows associated with the prior S&P 500 peaks from April 2016, November 2015, and May 2015

US equities outperform year-to-date relative to several European equities. Note the FTSE 100 index is down by over 7% when normalised in USD terms. UK 10y yield looks to extend lower towards targets near 0.59% and then the 0.20% area. Long-end outperformance points towards 53bps and then 20bps for the UK 2's-10's spread. Brent crude topping signals point lower in range towards our targets near 46.30 and then 44.43.

RATES FIGURE 2 We look for the UK 10y yield to extend bullishly towards targets near 0.6% and then 0.2%. Long-end

outperformance signals lower for 2s-10s towards 53bps and 20bps.

5 July 2016

Top 10 for Q3 2016 – Referendum rocks risk appetite 1. TRENDS: GBP takes the heat 2. Pound plummets 3. VolT: GBP sell-off endorsed 4. Relative US equity outperformance 5. YEN for a safe place 6. Gold: safe haven

7. US yields squeezing lower US rates have enjoyed a risk-off rally with the US 10 yield pressurising its range lows at 1.38% (level last seen in 2012). A close below 1.38% is likely this quarter, in our view, to target 120bp. Resistance is at the channel low, currently at 112bp. The US 5y yield has dipped to levels last seen in 2013, near the psychologically important 100bp level, and has further to go. A close below 100bp would open up targets near 90bp (Q1 13 pivot highs). However, the US 2y is holding near 2015 levels, lagging the more aggressive moves seen in the US 10y yield, and we expect US 2s10s to head lower in the range to target 65bp, and then lower to 54bp.

FIGURE 7 US 10y yields testing range lows; while US 2s10s maintains its downward leg in range for outperformance at the longer end

8. EM equities downside in range 9. ZAR volume drops off 10. CE3 downside pressures emerge 30 June 2016

July Seasonal Chart Pack Highlights •

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Major bond markets are broadly bullish in July. German 10’s have their most bullish month of the year by mean returns and their highest percentage chance of advancing. The USD becomes more choppy in FX space during July. EURGBP has its worst month in H2 as measured by mean returns. Copper has its most bullish month of the year by mean returns and the highest percentage chance for advance. Equities for major western economies are broadly bullish in July. The German DAX index has its best month of the year by median returns.

FIXED INCOME FIGURE 3 July FI seasonal biases, bp

(Bloomberg) -- 10-yr Treasury yields may extend decline triggered by yesterday’s BOE rate cut toward 1-mo. low at 1.42% if nonfarm payrolls come in below 200k as expected, Bloomberg strategist Mark Cranfield writes. • •

08/16/2016 20:39:59

[BFW]

Fed Funds Contract Has Bearish Outside Day After Dudley: Charts By Mark Cranfield (Bloomberg) -- January Fed funds contract closed yesterday below intraday low from Aug. 15, on highest daily volume since the blowout U.S. jobs report released Aug. 5, Bloomberg strategist Mark Cranfield writes.

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10-yr holding below 50-DMA at 1.58% for past two months; click here for chart Momentum studies: o MACD below signal line and zero line o Slow stochastics %K at 40; Williams %R -69 If new jobs exceed 200k, yield may rise toward 100-DMA at 1.70% 10-yr yield steady at 1.50% Nonfarm payrolls seen adding 180k, according to median est. in Bloomberg survey; data due 8:30pm HK time NOTE: Mark Cranfield is an FX strategist who writes for Bloomberg. The observations he makes are his own.

…Momentum studies bearish: • MACD below signal line and zero line • Slow stochastics %K at 20 and Williams %R at -100, both in oversold territory January futures now at 99.470 vs 99.475 on Tuesday Futures imply 51% probability of a hike at Dec. FOMC meeting; the prior day, March 2017 was the first month over 50% August 1, 2016 — 9:45 AM EDT

HSBC: Wave Goodbye to the Widowmaker — Japanese Yields Are Technically Poised To Explode By Luke Kawa

If HSBC Holdings Plc's Head of Technical Analysis Murray Gunn is right, we're in for the death of the Widowmaker making widows. …Gunn sees this move higher in

08/04/2016 20:40:59 [BFW]

Treasury 10-Yr Yield Could Eye 1-Month Low After Payrolls: Chart By Mark Cranfield

yields as the start of a new Elliott wave, which a technical pattern that tracks particular phases of price action as they move up and down within a channel. "The Japanese Government Bond market is once again showing signs that it may be ready to start the long-awaited sell-off," he writes. "The JGB 10-year yield exhibits a long-term Elliott Wave ending diagonal pattern that, once

complete, should result in a move up in yield that should astonish even the most ardent JGB bears."

U.S. 10-year Treasury price has surged to multiyear highs following a squeeze breakout signal. TEMA is bullish as further upside looks likely. ...as Daily TEMA Turns Neutral

"A move back up through zero would be the first signal that a fast move up towards 1 percent and beyond was probably on," he added.

Since breaking to new highs, the U.S. 10-year note has managed to sustain price action above prior highs. TEMA remains bullish, but the bearish divergence on the Fisher Transform is cause for caution.

FIXED INCOME IN BRIEF Global Yields Continue Their Descent Japan, German 10-Year Yields Fall Further Below Zero

Quarter in Brief Cross Asset Allocation Overview Q3/2016

GLOBAL MARKET OVERVIEW FIXED INCOME U.S. 10-Year Weekly Price Surges...

Charting the 2016 year-to-date performance of the 10-year yields of Germany, Japan, the U.K., Canada, and the U.S. shows yields have continued their decent. German and Japanese yields continue to move further below zero, with

Japan hitting -0.25 percent. U.S. 10-year yields have dipped below 1.5 percent for the first time in 54 years. British yields fell below Canadian 10-year bonds on the heels of the Brexit vote.

19 September 2016

Global Markets Technical Analysis [Bi-Weekly] The contrarian view

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Healthy consolidation within the bull cycle (tactical medium-term) •

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Recent market price actions do not disturb our expectations of extended risk on cycle cross asset. Developed equities recent consolidation/healthy technical pullback seem close to exhaustion offering opportunities to re-enter the bull cycle at more attractive levels. Similar healthy consolidation to key retracement levels have been seen on Chinese and emerging equities making risk/reward long positioning even more appealing. Government bonds negation of short-term bullish continuation pattern also triggered healthy consolidation near key support levels where we think the primary bull trend is likely to resume. We think the EUR/USD currency bull trend is likely to resume at a slow pace near the wellestablished 1.15 distribution level with a target of 1.05 by early 2017. This expectation of low momentum USD (DXY Index) appreciation is unlikely to disturb the bull cycle by early 2017. We still believe potential short-term capitulation of market sellers might push global equities, especially US, into new final tactical tops. From a technical perspective, US equities are still trading in a final wave 5 bull cycle: this supports 10-15% potential equity upside and additional room for the “hunt for yield” before this cycle ends by early 2017. We expect the structural bear cycle to start when prices reach those targets.

5 bull cycle is now likely to touch the 2,350 level and potentially rise to 2,400 by early 2017. SPX’s recent healthy technical consolidation near the 2120 major support is an opportunity to enter the medium-term bull cycle. SPX is entering a short-term consolidation, wave 2 of wave 5, with two possible shapes (i) a running flat consolidation inside the [2120;2190] trading range, and (ii) a zig zag correction to 2035. Both cases do not disturb our medium-term bull cycle view. Multiple bullish breakouts seen in cyclical sectors also support extended risk on cycle.

…US10Y Tnotes break of the December 2015 uptrend support negated the bullish continuation triangle and triggered a shortterm fall near 130. The correction might extend to the 129.5 support (triangle target) where prices are likely to start a technical rebound.

…10Y TNote (First Generic Future) negated its bullish continuation triangle • •

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10Y Tnote prices recently built a triangle that is in most cases a trend continuation pattern. The break of the December 2015 uptrend support has negated this expected bullish continuation move and triggered a short-term fall near 130. The correction might extend down to the 129.5 support (triangle target) where prices are likely to start a technical rebound. Note RSI 14d is now close to the oversold area.

The correction near the 129.5 support offers buy opportunities as we think the bull trend is likely to resume on that level.

US 10Y Treasury Note (First Generic Future) Daily Chart – Triangle Invalidated

Conviction trades  Long Dec-16 Call Spread 105%/115% on HSCEI at 2.13%  Long Dec-16 Appearing Call Spread 105%/115%/125% on HSCEI at 2.50%  Long Mar-17 105% Call on HSCEI Up-and-out on WTI above 120% at 1.90% (KO barrier observed at WTI daily close, vanilla Call at 4.9%, i.e. 61% discount to vanilla) [With this structure, investors takes advantage of 1. contango term structure of WTI, 2. high volatility level of WTI, 3. positive implied correlation

Technical Summary: •

SPX broke the major resistance level of 2120 in midJuly 2016, confirming that the US equities final wave

US Equity Market: SPX confirmed trading in final

wave 5 bull cycle (mediumterm view) •

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The S&P 500 broke the 2120 major resistance in mid-July 2016, posting a new historical high level. This distribution/take profit area has capped the bullish trend since January 2015. The recent breakout gave us final confirmation that SPX is now trading in the final wave 5 bull cycle and not in a complex corrective wave 4 (which appeared to be a classical a,b,c zig zag correction). The SPX bullish trend is now likely to continue to the end of 2016 or early 2017: we expect wave 5 to materialise completely and to equal wave 1. This gives a minimum theoretical bull target located at 2350 that could extend to the longterm bullish channel upper line around 2400. The recent Dow Jones Transportation average broke through its January 2015 downtrend resistance, confirming the Dow Jones Industrial’s previous breakout. According to the Dow Theory, we now see evidence that we are trading in a new cyclical bull market.

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Two consolidation scenarios need to be considered at this stage: SPX is entering a short-term consolidation, wave 2 of wave 5, with 2 possible shapes (i) a running flat consolidation inside the [2120;2190] trading range and then upside break; (ii) in case of 2120 downside break, zig zag correction to 2035 and then the bull trend resumes. o We believe the consolidation described in (i) is the most likely scenario. Both cases do not invalidate the medium-term bull cycle: (i) SPX is still trading in wave 5 bull cycle to a larger degree, bull target remains 2350 up to 2400 by early 2017.

SPX Daily chart

SPX Monthly Chart – Wave 5 underway (Elliott Theory)

FX Market: DXY likely to retest its 1Q16 uptrend support •

US Equity Market: SPX succesful healthy technical pullback to the 2120 major support •

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SPX’s multiple failures to break the 2190 resistance to the upside progressively built a price/RSI 14d bearish divergence, a leading indicator of potential bearish consolidation. Recent elevated SKEW/VIX Ratio, a leading indicator of tactical correction, also made the SPX vulnerable to consolidation. The consolidation happened on Friday, 9 September 2016. Prices pulled back near the 2120 major support (mid-July 2016 breakout level was at an alltime high) that successfully contained the selloff. RSI 14d normalized to neutral area: a healthy factor for the medium-term trend.

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DXY behaved similarly to EUR/USD, building a [92.8; 100] trading range since January 2015. We saw multiple rebounds on the 92.8 major support in 2015 and 2016. Short-term price action is likely to retest the 1Q16 uptrend support that offers tactical buy opportunities. We continue to expect DXY to progressively rise near the 97.5 resistance level in 4Q16, up to 100 by early 2017.

DXY Daily chart – uptrend support likely to push prices near the 97.5 resistance

Market Commentary │ September 14, 2016

Weekly Roundup: USDJPY as we head into the policy frontier

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Chart of the Week – USDJPY as we head into the policy frontier – As we

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approach what may be an important Bank of Japan meeting, here we refresh our Japan charts. –

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They continue to point towards the risk of a weaker JPY across many crosses – USDJPY, CNYJPY, and EURJPY. Broadly the equally weighted G10JPY Index still suggests higher levels (JPY weakness) The Nikkei 225 is also set up for a rally, possibly to the trend highs again over the medium term, though we are waiting for specific breaks As the Techamental charts have highlighted, Japan is once again in a situation where policy (re)action is likely needed. Given the bullets already used, perhaps we will see the envelope being pushed further in the realms of Central Banking over the next week.

The equally weighted G10JPY Index has continued to hold the 76.4% retracement of the whole move that started in 2011. This was tested in July and we have stabilized since, suggesting the downtrend is over Focus is on the channel top at 0.8643. A breach of that would suggest a move higher (JPY weakness) to the 200 day moving average at 0.8975 which is 6% above current levels.

Japanese 10 year yield – Decent levels tested

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Equally weighted G10JPY Index – Long term 76.4% retracement arguing for JPY weakness •

Japanese 10 year yields have tested good resistance here at zero where the trendline and horizontal levels converge A firm breach of the zero to 5 bps area (where the 55 week moving average comes in), if seen, would be an important break that could open the way for 20bps and possibly an extended move to 38 bps+ over time.

Japanese Techamentals also give rise for thought What options do the Bank of Japan have? Cut the interest rate further into negative territory FX Intervention Issuance of longer dated Bonds .. Interest rates are already low now. They are already buying JGBs and ETFs. What could they buy that would weaken the JPY? The straight policy of increasing asset

purchases and weakening the currency would be to explicitly buy foreign assets, namely US Treasuries. Of course to do this they would need to sell JPY and buy USD, but that would be a “process” not an “objective” in itself. In the end it would be an “investment decision” that would result in – A higher USDJPY – Higher US Bond prices (all else equal)

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Fixed Income – Easy peasy lemon SQUEEZEy –

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Global curve steepening has caught markets by surprise and the million dollar question is how much longer will it last? Views run the gamut from fading the move immediately to this being start of a long term sell-off in the back end of global yields. Our bias is that the trend of curve flattening especially in the US is not over; however, the short-term correction may continue. This may create some volatility in the coming days/weeks but ultimately we view this as a market/positioning correction before trend resumption.

We have previously highlighted that the overall setup looks like a major head and shoulders and last week also saw a close back above the neckline. Upside follow through will be needed to invalidate the pattern.

A move towards the 1.90% area may now be seen though short term resistance levels worth keeping an eye on are currently being tested…

US 10s testing resistance

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German yield curve: where it all started •

The 1.75% area (late June high and trend line) is currently holding as resistance with the 200 day just beyond there at 1.78% Through there and further steepening is likely

US 2s-10s extended targets

US 10 year yield upside break confirmed

Just beyond 105bps is the converging trend line and 55 week moving average around 110bps and then the major lows from 2012 and 2015 This squeeze is perfectly normal

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The US 10 year yield already saw an upside break confirmed last week with the close through the 1.601.65% area (converging 2013 and 2015 low, trend line and the range highs through July August). An upside outside week in continuation was posted on the break as well.

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Frequent readers may know that the US 2s-5s curve is one of the best charts in our view (historically a great cyclic indicator with turns being seen at similar levels through each cycle) The 36bps area has been a significant level over the years and twice we have seen a bounce from there to the 50bps area A bear flattening curve in the coming years in the US continues to remain our bias as the Fed normalizes monetary policy causing the front end to rise while a relatively attractive backend yield on an international basis should keep that part of the curve somewhat “capped” This current bear steepening, in our view, is simply a reaction function to the steepening coming from Europe and Japan where the potential for a shift from monetary policy to fiscal policy is becoming a popular topic amongst investors. From our perspective, the efficacy of Central Bank policy on growth is diminishing whereas the potential costs are coming more into light (distorted asset markets, low returns for savers and pensions, poor bank earnings). Are Central Bankers coming to a similar conclusion? At the very least, recent rhetoric would suggest they would like to see a shift of the burden for growth from their shoulders to those of politicians. Were that to become a reality, further steepening in Europe and Japan is possible and that may have a feedback loop into US curve steepening (though we may just see a shift higher in the curve without much change to the shape given Fed policy). However, this is a tall order. A coordinated boost in fiscal spending from the EU seems incredibly unlikely at this point given the political strain already seen in the region. It remains a possibility in the US though it won’t even enter the realm of discussion until next year and even then the House maintains a fiscally conservative position. In Japan a fiscal boost has been discussed ad nauseum with no meaningful change. Therefore, a steepening curve due to a shift from monetary to fiscal stimulus – while in our view what SHOULD be done – remains unlikely in the near term. As a result, we do not see a case for steepening to become the new trend and view this simply as a positioning squeeze following a flattening move that may have been “too far too fast.”

Weekly Roundup: US interest rate markets“Throwing a curveball” Chart of the Week –US interest rate markets- “Throwing a curveball” -

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Equities – Look for the trend to continue -

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We think that the underlying up trend in the S&P will likely resume and we are encouraged by the fact that that supports seem to be holding Volatility will most likely remain elevated, however, that may simply be a function of positioning unwind triggered in fixed income markets.

Market Commentary │ August 25, 2016

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The present set up in US interest rate markets suggests to us that flatter curves, led by 2’s versus 5’s in particular, still look likely. However, what is much more important to us, even if this transpires, is what type of flattening takes place and what is the underlying rationale. In the chart of the week, we will once again visit the dynamic of yield and curve direction and give our “take” on what levels and “dynamics” are important From the outset, we would articulate (quite firmly) that we do not expect this flattening, if it takes place, to be suggestive of a “negative economic/market event’, despite that being “conventional wisdom” at the moment.

+35 basis points has been the “line in the sand” in this spread since it held in 2012. The last 2 occasions where we saw the spread lower than this (in a downward move) were 1994 and 2005. Once again we have an 11 year gap, and like 1994 and 2005, (to a lesser extent) we are in a “Fed normalization” period following an aggressive easing cycle in short-term rates (1989-1992 and 20002003).The smallest move on a break below this area (1988,1994 and 2005) was down to +11 basis points. Interim support before this level was around +62 to +64 basis points and gave way in December last year i.e., it gave way as we moved towards an interest rate rise by the Fed Will support give way again? Will it be with rising rates (Bear flattening) or falling rates (Bull flattening)

or perhaps a “hybrid” (rising short term yields and falling longer term yields). In reality, any of those 3 circumstances are possible. Let us look at the likely scenario (in our opinion) that could cause each 1. Bear flattening • This is a relatively easy one. This is what happened in the 1988/1994/2004 periods onwards and is your traditional/normal flattening (in a traditional normal World). This is what would be expected to happen if it became obvious that the Fed was “returning to the table” and getting ready to raise rates again. We would not be surprised that this dynamic could materialize as we head into December. However, we are very skeptical that the “most dovish Fed in the history of mankind” is going to “upset the applecart” ahead of November. You cannot tell us that this Fed would hold for “Brexit” but not for the US Presidential election. 2. Bull flattening • This would come with downward moving yields where US 2 year yields would likely not move much past the low 50 basis point area but long end yields would continue lower. One scenario here could be that there is a belief that things are softening in the US and that QE might be back on the table. We do not really see this as likely. It could also be a combination of expectations that the Fed will not move anytime soon and the back end of the US curve remains a “value trade” relative to other major bond markets (Japan, Europe and UK in particular). This, we think, is highly likely. 3. “Hybrid” flattening • This would be the “sweet spot” where short term yields could drift higher on the back of the belief that the Fed may move again but in a very gradualist fashion. This would still leave the long end of the US curve looking very attractive on an “international” basis and could see the curve therefore flatten for “non-domestic” reasons. In this instance as long end yields at minimum would lag the move in short yields and feasibly move in the opposing direction. This is predominately a demand/supply driven dynamic where increased demand for value in the long end of the US curve is not matched by supply. Two things that could change this would be: - The Fed deciding to stop rolling over its fixed income holdings - A big fiscal stimulus decision financed by new long term debt issuance - Both these scenarios are credible but in our view unlikely to be 2016 events. • Therefore our bias is to think that between now and the other side of the US Presidential election we could be looking at a bull flattening which may then morph into a “hybrid” flattening and finally a “bear flattening” (That being a big work in progress as if the Fed were to be seen to be caught behind the curve or they were to start reducing the balance

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sheet or we were to see a big fiscal stimulus program this could be a platform for the curve to steepen.) It should be emphasized that the “narrative” that assumes a flattening curve is a “negative domestic US event” is completely wrong. That does not have to be the case. An inversion of this curve in the region of 20 basis points, if seen, could be a different matter. This happened in 1989, 2000 and 2006 and in all 3 instances was a correct “harbinger” of “bad things around the corner”. We also saw this negative curve dynamic over a sustained period in 1978-1982, but this was a high inflation dynamic that saw Volcker raise short term rates to extreme levels (20%). That is not something we envisage from this Fed, today, tomorrow or “anytime”.

…How do the individual charts look?

US 5 year yield is still testing the breakout area at 1.11-1.15%

A weekly close above would look to be constructive and at least alleviate the concern that this could be a double top that targets as low as the trend lows of 2012 again (53 basis points). Such an up close, if seen, would suggest at least 1.36-1.37% again. Absent that break higher, the targets/support areas on the 5 and 2 year yield charts are both around 53 basis points.

US 10 year yield. Has not yet managed to break good resistance

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On the other side, a weekly close below 2.08%, if seen, would open up the possibility of a move lower towards a level possibly even sub 1%.

Conclusion

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While it is constructive that the 10 year yield could not hold below the 2012 lows it has still not done enough to suggest that we are “out of the woods” A weekly close above the resistance range from 1.63-1.68% would go some way to alleviate those concerns. In the absence of that, this could be a bigger head and shoulders top that is seeing the re-test of its neckline. A smaller head and shoulders did complete in January with a target of 1.32%. The neckline was re-tested and held and then it did indeed fall to a low of 1.32% The larger head and shoulders with a neckline at 1.68%, unless negated would have a conservative target of just below 90 basis points (%age change basis rather than linear target which would suggest a move to 25 basis points. At low levels like these linear targets are likely too aggressive. However the midpoint of the conservative/aggressive targets comes in just over 50 basis points)

There is no doubt that the whole dynamic here in terms of yield and curve direction is very “fluid” and likely event driven. (Not least by Chair Yellen’s Jackson Hole comments this week). As we noted earlier in this piece, we are very skeptical that this Fed, at this point, is going to guide towards a rate hike until the other side of US Presidential election. As a consequence we would not be surprised if we end this week with the market no longer believing we will see a rate hike this year (albeit we believe that it is still possible that dynamic changes again later in the year). If so, then we suspect that we are going to see

these curves flatten further in the coming weeks/months. In this timeframe we also suspect that this will be a “bull flattening” with yields across the curve moving lower again led by the longer end of the curve. We believe that such a move is likely equity, LM and commodity market supportive but less USD supportive, in the near term at least.

US 30 year yield held very good support around 2.08% and bounced 16 September 2016

Fixed Income Weekly Technicals Credit weakness is beginning to rear its head

US 10Y Yield - Daily Chart Is expected to have formed a major low at 1.32 but still needs to rise above 1.78/79 to confirm •

We would like to see it at least regain the 2.362.38% area on a weekly close basis to stabilize.

 We still believe that the US 10Y yield formed a major low at 1.32 in July.

 The July peak at 1.63 has been bettered with a current September high being made at 1.75.  It is close to our upside target zone at 1.78/79 where the late June high meets the 200 day moving average.  A daily chart close above this area will need to be made for a bottom to be confirmed.  Once this has happened the March-to-May highs at 1.89/2.00 will be back in the picture.  Minor support below the 1.65/63 July and August highs can be seen between the 55 day moving average and current September low at 1.54/53.  Much further down lies the 1.44 late July low.  Below the next lower 1.32 July low lies the 1.25 mark.

and the 55 day moving average at 132065/095 cap.  Once the 130-105 support level has been slipped through the March-to-May lows at 129-095/128-165 will be targeted.  Minor resistance above the current September high at 132- 155 can be seen around the 133-045 late July high.  Only if an unexpected rise above the 13407/075 area were to be seen, would the 13428/305 August and December 2012 highs be back in the picture.

US 10Y T-Notes Daily Continuation Chart

US 10Y Yield Daily Chart

US 10Y T-Notes – Daily Chart Are heading towards the June low at 130-215 and 200 day ma at 13007 as expected  We believe that US 10Y T-Notes formed a top at the June and July highs at 134-07/075.  The late June low at 130-215 and 200 day moving average at 130-105 will remain in focus while the three month resistance line

14 September 2016

Multi Asset Macro Pack Key Market Themes Overview Critical Focus Charts • • •

10yr German yields have sold off aggressively, post the recent ECB meeting, and established a larger yield base above .03% to target .12/.17%. Europe Stoxx 600 has again found a ceiling at key resistance at 352, and fallen back into its range. European Banks have been capped by resistance at 149.

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10yr US yields target more important support levels at 1.77/80%.

Resistance moves to 1.62/59% with a break of 1.52% needed to turn the trend bullish again for 1.44%. Extension through here is required to retest the 1.32% record low. Below here can aim at 1.25% next, then our 1.16/1.05% target.

Resistance moves to 2.36% with a break below 2.30/29% needed to test 2.17%. Below here is needed to aim back at major resistance at 2.09/07%. Beneath here can look to 2.00%.

10yr US yields have extended their correction to more important levels at 1.77/80% - the “Brexit” highs, 38.2% retracement of the 2015/16 yield fall and 200-day average. We look for an attempt find a cap here. Extension above 1.80% is required to signal a more sustained move higher to 1.89/90%. • • • • • •

10yr UK yields’ spotlight turns to the key .88% level. Follow through above here is need to establish a large yield base. 10yr JGBs stay biased higher to our .02/.04% target. US Credit Risk Appetite continues to turn lower from “Euphoria” and MACD momentum is attempting to cross lower, which would provide a ‘sell’ signal. US Credit Spreads are attempting to set larger widening bases and EUR Credit spreads are threatening to follow suit. S&P 500 remains under pressure and continues to weigh on key near-term support at 2120/16. EM is correcting lower. We allow for weakness to extend, but with a large existing base still in place we view weakness as corrective for now.

Other Core Themes • • • • • • •

30yr US yields target support at 2.50/59% 30yr US yields set a yield base on its break above 2.34/38%, and now target what we see as more important support at 2.50/59% - a cluster of retracement levels, the 200-day average and the “Brexit” yield highs. We look for this area to try and cap and turn yields lower again. Extension above 2.59% is needed to target 2.67/70%.

USD stays defensive in its broader sideways range. GBP’s correction appears to coming to a conclusion and we stay medium-term bearish. EURGBP has found a floor at our support target at .8300/.8252 and we look for a recovery back up to .8706/.8816. USDJPY remains range bound for now, but the mediumterm downtrend remains in place for our target at 94.78. UK Inflation Breakevens appear to have completed a base. 10yr US/Germany spread has snapped back into its converging range. Oil and Copper remain range bound.

24 August 2016

Chartbook: Climbing the Wall of Worry In the attached chartbook, the Credit Suisse Research team provides a pictorial overview of key developments in the global economy and across securities markets

…Technical Analysis

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World Wealth is critically placed at its record high, also its channel top of the past two years. A conclusive break above here is needed to suggest the current rally in Global Risk Appetite can be extended into the end of the year. US Credit remains our main concern, with US Credit Risk Appetite already deep into “euphoria”. Although a momentum “sell” may well be some distance away, if seen, this would raise the risk of US credit spread widening. We stay bullish EM Equities following the completion of important medium-term bases. Despite the moves already seen, we see scope for further gains in Q3/Q4. We also continue to look for EM equities to outperform Developed following the completion of an important base. We maintain our core bearish outlook for USDJPY, where we target 94.78. We expect the Nikkei to move lower as well. Nasdaq 100 is critically placed at its 4816 record high from the top of the Tech bubble in 2000. A conclusive move above here is seen as crucial to the health of the broader US equity market.

2s10s US bond curve is holding at our 80bps target. However, while capped below 97bps the broader trend can stay flatter through 80bps to target 64bps next, then ideally 47.5bps.

 We continue to look for 10yr US bond yields to fall, and for the 2s10s US bond curve to flatten. 10yr US yields are holding in near-term range. However, we ideally look for solid support at 1.68/72% to hold to maintain the medium-term bull trend. Follow through below 1.44% is needed to retest the 1.32% record low. A break here can aim at 1.25% next, then our 1.16/1.08% target, potentially 1.00% where we would expect a floor.

17 August 2016

Market Spotlight: Fed watching Poised at the top of the range US yields have essentially been rangebound for the past month, and currently sit near the top of their ranges as the latest Fed minutes are awaited. Whilst this suggests on a risk/reward basis it makes more sense to be long at these levels, key support levels need to be watched closely. Our focus has been on the 5yr, and specifically the 2s5s30s US bond 'fly, which is crucially placed at key resistance from the top of the range of the past six months at -71bps. Should a close above here be established post the minutes, this would see a spread base established, opening the door to what we would expect to be a decent phase of 5yr underperformance against the wings.

…For the 5yr US yield itself, only a close above 1.18% would suggest the nearterm range has been resolved higher, and yields can rise to 1.25%, potentially the late June spike high at 1.29%. Back through 1.055% is needed to reassert a bullish tone.

2s5s30s US Bond 'Fly – Weekly

05 July 2016

Technical Analysis - 30yr US yields move to new record lows & 10yr US yields are expected to follow suit 30yr US yields break to new record lows 30yr US yields have extended their strong rally this year, and we flagged in our recent Q3 Global outlook that we expected to see an eventual break below the 2015 record low at 2.22%. We have now seen an aggressive break through this level, setting new record yield lows, and we remain bullish for trendline resistance next at 2.09%. We would expect this to hold at first, and allow for fresh selling here. However, a direct break beneath it can then look on to the 2.00% psychological hurdle. Support shows initially at 2.30% with 2.38/41% – price support and the 38.2% retracement of the May/July rally – ideally holding to keep risks directly bullish. A break of 2.43/46% is needed to ease immediate bullish risks.

10yr US yield spotlight remains firmly on 1.38% record low 10yr US yields have also seen a strong rally this year, which accelerated in June when it broke out of its range through 1.68/645%. This leaves yields now weighing on the record low from 2012 at 1.38%. This is holding for now; however, we expect a break through here in due course to then open up further strength to 1.25% initially then a bigger obstacle at trendline resistance at 1.16/12%, which we would look to hold at first. A direct break through the latter level would open up a move to psychological resistance at 1.00%. Support shows first at 1.53/555% – price support from February this year, 38.2% retracement of the June rally and the 13-day average – which ideally holds. A break here can aim at 1.64%, with a break through it needed to ease bullish pressure for 1.68/70%. Trade: Go long at 1.50/53%, stop above 1.60% for 1.12% 10yr US yields – Weekly

28 June 2016

Global Market Outlook Q3 2016 - Standing on the edge looking down  

Trade: Go long at 2.34%, stop above 2.40% for 2.00%. 30yr US yields – Weekly

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The “domestic” UK FTSE 250 looks to be close to completing a medium-term top. We expect GBPUSD to weaken to 1.2752, potentially as far as 1.1855. European Equities are of real concern. Below 302 for the Stoxx 600 would establish a medium-term top. The DAX is outperforming, but is critically placed on its medium-term uptrend. We stay bearish Spain and Italy. At the sector level in Europe, things look worse, with tops in place for Banks, Insurance, Media, Travel & Leisure, Retail. S&P 500 holds a small top, but remains well above the lows for the year. Nasdaq 100 is expected to test medium-term support, and underperform. We maintain our bearish outlook for Japan – Nikkei and USDJPY.

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Global Risk Appetite momentum is threatening to turn lower, warning of a move back to “panic”. Equity Risk Appetite momentum has already turned lower. But, EM equities are outperforming Developed, and may be close to an important medium-term base.

10yr US yields below their 1.38% record low can see yields fall to 1.16/12%.

The direction for US Real Rates also remains closely tied to the direction of the US$ 10yr US real rates below .115/.095% should reassert the bull trend, for a move to test the -.035% low of 2015.

10yr US yields have extended their rally to retest the 1.38% record low. Although this is holding for now, while 1.64% caps the risk is seen staying bullish. Below 1.38% and we target 1.25% initially, then 1.16/1.12%. Whilst we would look for this to hold at first, a break can target 1%.

Above 1.64% can ease the immediate bullish tone, for a move back to 1.70%.

5yr US yields are expected to test .82% 5yr US yields below 1.125/.13% can keep the risk bullish for a test of the 78.6% retracement of the sell-off from 2012 at .82%. Whilst we would expect an attempt to hold here, a direct break can see strength extend back to the .625/.535% lows.

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We expect further flattening of the 2s10s US bond curve.

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US Inflation Breakevens are expected to retest their lows from earlier in the year.

Above 1.13% can reinforce a sideways range, for a rise in yields back to 1.23/28%.

Lower Inflation Breakevens are typically associated with lower 10yr US yields

30yr US bond yields stay bullish, and we look for a break to new lows 30yr US yields maintain their top from May, and we stay bullish for a test of the 2.22% record low. Although this should clearly be respected, we look for a clear break in due course, to target 2.09%, and potentially 2%.    

10yr German yield risk says seen negative. The US$ is attempting to strengthen, but has yet to secure a convincing base. We look for Brent Crude Oil to be capped around current levels. We are bullish Gold following the completion of a large base.

Below 2.43/46% can keep the immediate risk bullish. Above 2.59% is needed to mark a near-term base.

Looking again at the 2-year yield, at 0.84%, it is back to another interesting spot. In the short-term, the 2-year yield is now back above the aforementioned two year-long Up trendline that it broke post-Brexit. It is also testing the Down trendline that has been in place since December of last year.

Dana Lyons’ Tumblr Aug 26, 2016 at 5:07 PM

Here Comes The Rising Rate Ruckus Again

Should yields break out above that Down trendline, rates could see further, possibly considerable upside (yes, I know we have heard that before).

Short-term rates are testing their nearterm and looong-term downtrends. “Test Week” concludes with a look at the interest rates. In late July, we noted the opportunity that rates had, at least on the short end, in potentially establishing some upward momentum finally. In recent years, we have on several occasions made light of the ubiquitous calls for higher interest rates. It’s not that we are smarter than everyone else. It’s just that we recognized the reality that – rates were, in fact, NOT going up. And as another matter of fact, they have actually been going down for the past 35 years. …Well, the way rising rate scares work is – just wait another month. And here it is in late August, right on cue. Following comments from the Fed Vice Chairman, interest rates spiked higher on the day.

Speaking of trendlines, the longer-term, is even more interesting. 2-year treasury yields peaked back in 1981 at 17% (yes, 17%!). Well, if you draw a trendline from that 1981 peak, connecting the 2007 peak, it would currently intersect at…0.85% (on a log scale, the trendline is more defined and presently intersects around the 3.5% level – that will be the line to watch, if and when it ever gets there).

Now some folks would take exception to this trendline as it contains just 2 connecting points. That is a valid point – we would prefer at least 3 connections for a

robust trend. However, if you look closely, the 35-year trendline has actually traced along the post-2015 peaks shown above in the first chart. Thus, there are arguably more connections than just the 2. Therefore, considering the length of the trendline, the proximity to current levels and the fact that yields have been treading just below it for the past 8 months, it makes for a compelling story. Imagine if this trendline is broken. If it is indeed valid, we could actually see some veritable semblance of “rising rates” come to fruition.

trendline. After following through on the breakout for a few weeks, the GDOW was halted at another key level of resistance: the 61.8% Fibonacci Retracement of the May 2015 - February 2016 decline at 2412 (the GDOW closed at 2410 on April 20). …Thus, as the chart shows, the GDOW is now contending with this convergence of the 2 key resistance lines in its attempt to hurdle to new rally highs (as we type, the index is trading at 2413).

Aug 05, 2016 at 2:25 PM

Global Equity Rally Facing Next Big Hurdle A key index of global equities is hitting a significant confluence of chart resistance. Back in early April, the global equity rally began to look a bit tired after 2 months of rallying. This was especially the case in the major U.S. averages and defensive sectors that had been bearing the brunt of the advance. Shortly thereafter, we saw a number of previously lagging areas of the market break out above key resistance that had been holding them back. This gave the rally some new fuel and propelled stocks higher for a couple more weeks before pausing. Included among this “new fuel” were global stocks, which had been lagging for some time. And a barometer of global stocks that we like to monitor, the Global Dow Index (GDOW), was able to achieve one of the aforementioned breakouts. In the process, the GDOW jumped above a plethora of key resistance levels, including the post-2009 Up trendline as well as the post-2015 Down

Here’s a closer view of the current action.

With sentiment finally getting a bit frothy and U.S. stocks perhaps getting extended, the global equity rally could sorely use some fresh fuel again. As in April, if the

laggard areas that aren’t as extended, like the Global Dow Index, can hurdle over current resistance, it could provide the rally with a much-needed jolt of energy.

GS Techs:

The Charts That Matter Next Week 1:01 am | Sun Sep 18 2016

Several have now come close enough to reaching their corrective targets 

This Week’s High Convictions: EURCAD – Adding bearish exposure with a stop above 1.4862. Initially targeting 1.45;slide 17 Eurostoxx50– Biased lower, targeting 2,761 (’11 uptrend). Preference to hold ~3,000;slide 11

Asset Snapshot

US10Y: TAKE PROFIT The market hasn’t yet reached an equality target from the July 6th low at 1.826% but starting to show momentum loss. The next level to overcome in a 1.618 from July 29th at 1.7475%. Any overlap back underneath 1.615% warns that a top is likely in place

US30Y: TAKE PROFIT The market has reached and so far held an ABC target from the July low at 2.475%. Within the broader context, the market now qualifies as a complete 4th wave corrective in a 5-wave sequence from Jun. ‘15. Wave 5 could retrace back towards the 2.09% lows from July Main Themes U.S. 30-year (2.445%) – Reached an ABC target from July 2.475%. Would have to break 2.62% to consider a base

Starting off in the rates space this week…

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U.S. 30-year yields have met/held a perfect ABC target from the July low at 2.475%. It’s also retraced near 38.2% of the decline since Nov. ‘15 to 2.49%. Bottom line, this is the level to watch for signs of a top developing. Within the broader context, this qualifies as a complete 4th wave corrective in a 5-wave sequence from Jun. ‘15. From current levels, wave 5 has an implies target down at 1.87% (if equal to the length of wave 1). At very minimum, a typical 5th wave should retrace back towards the extremes of wave 3 which in this case comes in at ~2.09%. As is frequently discussed, 4th waves should go no higher than the bottom of wave 1 which in 30-year yields is up at 2.623%. As such, would have to break further than 2.63% to suggest potential to have put in a more material low.

View: Watching for signs of a top ahead of 2.4752.49%. No further than 2.62%. Scope to retrace back towards the 2.09% lows.

U.S. 5-/ 10y (1.20%/ 1.65%) – U.S 5-year yields have an ABC targeting 1.297%. 10-year yields have an ABC ~1.83%

A number of ABC targets are near to being satisfied… U.S. 5-year yields have an ABC from July targeting 1.297%

German 10-year (0.007%) – Watching for signs of a top ahead of ~0.049-0.113%. The rise in yields looks corrective SPX (2,139) – A break of 2,128-2,113 increases downside risks. Need above 2,180 to re-consider bullish exposure

Have shifted to a cautious stance on the S&P…   

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Because of the wedge-like nature of the rise, this looks more like a corrective move than an impulsive one. As such, want to be careful of any break lower than wedge support down at 1.1386-1.1313%. These types of patterns, once completed, often see a full retracement back to where they were initiated, in this case suggesting potential to eventually re-test the 0.90% lows from July.  Would have to break further than 1.297% (ABC target) to imply that this has scope to be something more impulsive 

U.S. 10-year yields have an ABC from July targeting 1.83%

As discussed in last week’s publication of the Charts That Matter, the break below 2,151-2,146 shows evidence of an impulsive decline 

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Because triangles are often B waves (rather than 2nd waves), this looks more like an ABC corrective than an impulsive 3rd of 5 waves.  The next level to overcome in a 1.618 from July 29th at 1.7475%. Any overlap back underneath the Aug. 8th interim high 1.615% warns that a top is likely in place. Would have to break further than 1.83% to imply scope to be something more impulsive.

JGB 30-y (0.740%)– The next important level to overcome is 0.59-63%. There’s scope to eventually see 0.74-79%

Consequently, have turned tactically cautious, waiting for further signal development. The level watch to now is 2,1282,113. This includes the 100-dma, the previous highs from June and 38.2% retrace of the June/August rise. A break lower than 2,128-2,113 will increases risks that the market may have completed 5-waves at the August high. This would open up scope to eventually retracing between 38.2% and 50% of the rise since February at 2,047 and 2,002. The index would have to move back through 2,080 (last Thursday’s gap resistance) to re-consider a resumption of the preceding trend. View: Neutral/cautious. Need above 2,180 (gap resistance) to re-consider bullish exposure. Shift to a bearish bias below 2,116-2,113.

HSCEI (9,596) – Potential to have finished a multimonth corrective process. Next retrace levels are ~9,470/ 9,014 SX5E (2,935) – The primary uptrend from Sep. ’11 is now ~2,761. Downside risks heighten significantly below this GBPUSD (1.30) – Next notable support is ~1.29731.2924. Eventually see scope to continue the larger (down)trend

EURGBP (0.8579) – Still need one more sell-off to complete the ABC from August. Watching for a top ~0.8576-82 EURUSD (1.125) – Next notable supports are ~1.1146 and 1.1085. Initial target on a break comes in ~1.09401.0912 USDCAD/ EURCAD (1.3212/ 1.4740) – USDCAD has strong resistance ~1.3207-1.3312. EURCAD at ~1.4862- 1.4895 USDMXN (19.61) – Next notable resistance is 19.92. A large degree ABC from the May low targets a move to 20.37 USDRUB (65.29)– Triangle pivots are at 63.72 (support) and 67.45 (resist.). A (downside) breakout looks imminent

Following the break below the support at 168.25, a downward bubble has started to develop in the daily chart, while weekly indicators remain downbeat.

WTI (43.19) – The trend-defining level comes at 41.39-39.96. A break below opens downside risks to ~37.46- 36.31

Under these conditions, the contract can be expected to extend its downward correction towards the support at 164.18 (ascending support trendline). A break below this last level would instil new downward momentum towards 162.12 (Fibonacci projection) before the support at 160.25 (lower band of weekly Bollinger).

Gold (1,310) – Next notable support is down ~1,288. It may take some time before the underlying trend can resume Gold LT (1,310) – There’s scope to eventually rally significantly higher Seen waves A and B of an ABC from Dec. Silver (18.79)– Next notable support is ~18.15- 17.75. Similar to Gold, seen waves A and B of an incomplete ABC

Resistance levels are located at 167.10, at 168.25, at 169.25 and at 171.12

PRICE ACTION LAB A Chart That Has Consistently Defied Technical Analysis Posted on September 14, 2016

15 September 2016

Technical analysis – Focus on T-Bond (future)

Has the 10-Year Note yield found a bottom? Many good technical analysts are trying to find an answer to this question. However, the chart has defied simple technical analysis since the top in 1981 and has done that consistently. “Is this time different?”

Some well-known technical analysts will argue that “This time is different” and the bottom in the yield was already established near 1.34% last July. But the fact is that the 10-Year Note yield chart has been a graveyard of simple technical analysis (lines, patterns, indicators, etc.) since the top in 1981, as shown in the chart below:

“Is this time different?” Maybe a better question is: “If you believe that 10-Year Note yield has found a bottom, or even that it will rally, are you lucky enough so that this time is different?” Because what one can observe from the above chart is a “no mercy” to simple technical analysis. I have no idea about the answer. The only people that know are those who determine monetary and fiscal policy, if they have made up their mind already.

One Of The Worst Charts Of All Time Posted on August 29, 2016

The 10-Year Note yield does not only have one of the worst technical charts of all time with a 35-year downtrend, multiple down-trendlines and resistance levels, but it also reveals the potential risks from central bank policies, including the impact of moral hazard at the government and business level. The weekly chart of the 10-Year Note yield since 1981 is shown below:

Multiple down-trendlines and resistance levels are drawn on the chart. There is a

possibility of a double bottom after recent gains with minor resistance at 1.65 and major around 2.00. Someone could ask: What is wrong with bond yields staying low?

To start with, there is possibility of yield curve inversion and recession. Investors respond to falling yields to very low levels by buying bonds to lock in the yield. This is a vicious circle that has resulted in a “liquidity vacuum” in the bond market, since bond dealers hold little inventory and prefer to act as market makers instead. Then, the expectation that yields will stay low creates moral hazard in government policies with the belief that it will be always cheap to finance huge deficits. The moral hazard extends to businesses where there is a growing belief that there will always be cheap financing for all sorts of projects, even where risks are high. An example is the recent rush to shale gas and social media. Last, but not least, low bond yields have annihilated middle class savings and have facilitated an extended stock market rally, especially in high dividend stocks. Historically such rallies are not sustainable and investors risk losses in the future in case there is an unpredictable development.

The list can go on as to why, not only technically but also fundamentally, the above chart is one of the worst of all time and unless the current double bottom holds and yields rise above 2% or higher, risks are high for irreversible damage to the economy and stock market.

SEPTEMBER 19, 2016

IN THE CHARTS - FOREX Today’s key points Having faced a steady down move until June, USD/JPY probed key graphical level of 100 which also represents the 50% retracement of whole up cycle between 2011 and 2015. It briefly tested the projection for the fifth wave at 98.90 and also hit a multiyear descending trend (linear chart). Formation of a hammer last month highlights 100 as an important level. Longdated indicators are at a multiyear support suggesting a weekly close below 100 remains essential for re-igniting downward momentum. Only in such scenario will the pair head towards next significant support levels of 2010 highs at 95/94.80 and even towards 90.70/90.00. Given the proximity to support levels, the pair has not witnessed a sustainable recovery so far. It appears to be undergoing a choppy consolidation within two converging trend lines. A break above recent highs of 104/104.45, also the 61.8% retracement from July highs will indicate possibility of a gradual rebound (See page 4).

Chart of the day: USD/JPY, monthly chart.

EUR/USD: break below 1.1130 will lead to deeper retracement. EUR/USD (hourly chart)

USD/JPY: evolving within two converging trend lines. USD/JPY has been holding support of 100, 50% retracement from 2011 and more importantly the projection for fifth wave at 98.90. Only a weekly close below 100 will mean further down move. Short term, it has rebounded towards a descending channel at 104/104.45; a break above is needed for further recovery. USD/JPY (hourly chart)

Chart of the day: USD/JPY, daily chart Upside in EUR/USD remains capped by graphical levels of 1.1460/1.15 while multi-decade channel at 1.0820/1.0782 has acted as support. Short term, it appears to be undergoing a consolidation within a triangle. A move below recent lows near 1.1130 will

mean possibility to test triangle lower bound at 1.1045/1.10. SEPTEMBER 16, 2016

CHARTING - COMMODITIES COPPER: AN INVERTED HEAD AND SHOULDER AT MULTIDECADE TREND THAT TAKES A LONG TIME TO CONFIRM...  After an elongated downtrend, Copper has finally

exhibited signs of stabilization above confluence of supports representing the trend line since 2001 ($4350) and the down sloping channel since alltime highs in 2011 (now at $4050). Monthly RSI has bounced off a support which confirms a major low was then achieved.  Recently, up move in Copper fell through at the

resistance line in force since September 2015 (now at $4930/4960). The current pullback could be forming the right shoulder of a broad bullish pattern (Inverted Head and Shoulder). Sustainability above $4588/$4540, the multi-month trend line and also the 76.4% retracement of the recovery is key. Daily MACD has tested a multi-month floor and is crossing above its trigger signalling possibility of up move.

WTI: $50/$52 IS ACTING AS A STRONG NEAR TERM BARRIER, A BREAK ABOVE HOWEVER WILL BE PERCEIVED AS A GAME-CHANGER.  Multi-year graphical levels at $50/52 and also the trend line from 1999 has turned out to be a medium term hurdle for WTI. This is also the confirmation level for an Inverted Head and Shoulder that has been forming for a year and has evolved after WTI tested the 8-year down channel support (at $26.00). Monthly RSI is close to a dual hurdle (50% mark) and therefore underlines pivotal resistance levels at $50/$52. Short-term the price action appears to be

constricted within two converging trend lines. A break beyond $50/52 will be perceived as a gamechanger as the aforementioned pattern will propel WTI towards $63/$66 eventually.

price action in the S&P 500, and the various positive patterns (Inverted Head & Shoulder patterns) recently confirmed on the MSCI World, the S&P 500 and the FTSE 100 will be a test of character in the pullback to come (see page 15-20, 25-28). EM equities and currencies have strongly recovered year-to-date but the pullback still has the appearance of a technical rebound. Another round of weakness is yet to come in EM currencies, especially in CNH and SGD (see pages 30-34).

SEPTEMBER 15, 2016

WHAT THE CHARTS SAY BOND MARKET AT THE MERCY OF A CORRECTION. MAIN THEMES Bond market at the mercy of a correction. In a dramatic new development, most G10 10Y government bonds hit all-time highs and major targets in the case of JGBs and Bunds post the Brexit vote. This was outlined in our previous quarterly where we forecast Bund yields to enter into negative territory but also warned that the episode could be brief.  An overstretched uptrend, combined with very high and hoarded positioning into the 10Y US Treasury (as high as in 2012) makes us think the government bond markets are highly vulnerable to a correction. Although it is somewhat difficult to assess whether this correction might materialise now or later in the quarter, various long and short-dated indicators all point to vigilance (see pages 4-11) Familiar with prolonged phases of shallow consolidation, as in 2012-2014, the Dollar Index remains in a transition phase and should stay relatively firm until the year-end, and particularly vs most EM. Of note is the EUR/USD which is slowly and gradually forming a base that bears similarities to the one that formed in 20002003 – going forward this could lead to a gradual upmove, but no sooner than 2017 (see page 21-24) .  Equity markets continue to be dominated by an outperforming US market, however the broad picture remains extremely fragmented and characterised by divergences between the Underlying and the Dow Transportation, the Nasdaq and between Mid and Small Caps. Overbought near term, we expect further complex

Lastly, commodity markets continue to carve a longterm base which is further backed up by the formation of a definite bullish reversal pattern (Inverted Head and Shoulder) on Brent at an 8Y. The confirmation level at $52 will undoubtedly be disputed for a while. Similar patterns are also being formed in NOK and RUB, which remain our top picks (see pages 35-42).

WITH LONG-DATED INDICATORS NEGATIVELY DIVERGING NEAR AN 8-YEAR RESISTANCE, THE UPTREND IN 10Y UST IS NOW SHOWING SIGNS OF FATIGUE...  With the CFTC net non-commercial futures positioning as high as in 2012 (1.38%) and long- and short-dated indicators approaching cyclical resistance and starting to run out of steam, a corrective pullback in 10Y UST looks overdue. It is a little difficult to assess whether the correction will happen now or after a marginal high, a break of 1.75%/1.77% should prompt early corrective signals.

and 2015 and a multi-year descending trend. It briefly tested the projection for the fifth wave at 98.90. However, given the proximity to support levels, the pair has not witnessed a sustainable rebound so far. In the event of a weekly close beyond 100, the pair will head towards the next significant support levels of 2010 highs at 95/94.80 and even towards 90.70/90.00.

WITH 10Y UST AND 10Y BUND MOVING IN SYNC, THE SPREAD HAS BEEN TRACING A TRIANGLE PATTERN SINCE 1Q 2015, I.E. LACK OF DIRECTION  Against 10Y Bund, the 10Y UST should continue to underperform once the triangle pattern is completed, i.e. 173bp is breached

USD/JPY: WEEKLY CLOSE BELOW 100 REMAINS ESSENTIAL FOR REIGNITING DOWNWARD MOMENTUM  After an accelerated downtrend, the USD/JPY has now come up against the key graphical levels of 100 which represent the 50% retracement of a whole up cycle between 2011

LONG POSITIONING IN JPY AS HIGH AS IN 2011/2012  USD/JPY set for a corrective rebound on the back of near-term exhaustion signs on weekly indicators and oversold conditions

S&P500: COMPLEX CONSOLIDATION. KEY SUPPORT 2125 - 2100 CLOSE WEEK  The consolidation that started in spring 2015 still has the features of a complex distribution phase in an irregular IV wave within an up cycle that began in 2009. There is still too much divergence remaining

between the Index and the Dow Transport, Nasdaq and mid and small caps. We expect a complex zigzag consolidation in

a/b/c/d/e or even more likely in a double pattern of a/b/c x a/b/c. This is the only scenario in which the index could avoid a return to the risk level of 1600-1550pts, with a longer lateral movement between 2200 and 1800 pts, or even more likely 1730 pts, thereby offsetting the lack of real depth. In the short term, if overbought again, the index could near a key support ( Dow Theory) between 2125 and 2100 at the daily close. Below immediate supports at 2068 then 2000-

leaving way to a tentative price stabilisation and a technical reaction. Weekly RSI indicator also emphasizes a significant resistance was achieved as it too hit a 4-year ceiling (horizontal red line) where negative divergences have appeared considering prices made a higher high (1.38% vs 1.65% then) but not the indicator. This underlines the upward momentum has slightly ebbed lately however since the indicator remains anchored within positive territory i.e. above 50% any pullback in the 10Y UST should be viewed as corrective so long 1.65%/1.75% levels hold. As highlighted in our previous reports, 1.65%/1.75% remains a crucial mid-term support representing the 23.6% retracement of the ongoing uptrend since early 2014 and the secondary upward channel since early 2016. Only a break past would lead to a deeper retracement towards the primary channel support at 1.90%/2.00%. Intraday analysis shows the 10Y UST remains constricted between the trend line support at 1.535%/1.55% and the horizontal resistance at 1.4570%/1.45%, also the 50% retracement of the recent down move. Beyond these levels, next resistance levels are located at 1.4360% (61.8% retracement) and more importantly 1.39%/1.38% while recent low of 1.625% will be an intermittent support before the key aforementioned support of 1.65%/1.68%. 10Y UST, weekly chart

1990 before the MT support of 1815 -1800 pts 

10Y UST, hourly chart

FRI 8/5/2016 8:23 AM AUGUST 5, 2016

CHART ALERT 10Y UST & BUND: MOST LIKELY RESTRICTED TO KEY GRAPHICAL LEVELS AT 1.65%/1.75% AND 0.05%/0.12% RESPECTIVELY 2012 levels of 1.38% have so far offered resistance to the ongoing up move since 2014 in the 10Y UST,

The duo believes this is the beginning of a "major basing process" for the 10 year that won't be completed until the first quarter of 2017.

And UBS isn't alone in noting a breakout in yields. A note out from RBS highlighted the 30 year yield broke a weekly downtrend that has been in place since the end of 2015. The bank notes that the move above 2.43% in the yield of the long bond opens up the possibility we see action work its way back into the pre-Brexit range of 2.51% to 2.77%, which dates back to the beginning of the year. SEPTEMBER 14, 2016

A 'tactical game changer' is taking place in the bond market US Treasury yields have rallied sharply off their July lows as markets price in the possibility of further Fed tightening by the end of the year. Selling of longer-dated Treasury securities has caused yields at the long end of the curve to rise as much as 35 basis points, running the 10-year yield above 1.70% for the first time since June 23, the day before the UK's Brexit vote. In a note out to clients on Tuesday, the UBS technical analysis team of Michael Riesner and Marc Müller noted the 10-year yield has broken its 2015 downtrend and the development is a "tactical game changer."

As for why we are experiencing this shift higher in yields, a note sent out to clients on Monday from Credit Suisse's fixed-income research team led by Praveen Korapaty highlighted several reasons.

First, the firm says markets are pricing in a more hawkish Fed. In addition to that, foreign investors are putting money elsewhere because the amount of negative yielding debt has shrunk considerably. Finally, foreign investors are parking their money elsewhere because the cost of Fx hedging has made it difficult to make money.

On Wednesday, longer dated US Treasury yields are down 2 basis with the 10-year and 30-year at 1.71% and 2.45%, respectively.