U.S. Treasury notes and bonds ready to break out, or down, from consolidation: Look out for Bonds, James - Bonds

U.S. Treasuries, both T-notes and bonds, have languished since their drop from peaks late last year. Are they ready to move in another leg down, or will they rally up? If down, then I've got the level of 116.88 for T-notes ($UST) as a C=A price symmetry, reading the drop as an ABC movement. The first obvious signs would be if Treasuries make lows underneath the recent consolidation. (U.S. bonds ($USB) nosed a slight new low yesterday, but ten-year notes ($UST) did not.) The ten-year T-note closed on its low yesterday at 121.55, and moving to 116.88 would not even place it underneath its 25-month moving average (currently at 115.13, see first chart below). Moving under the 25-month moving average would signal something even more bearish for T-notes.

It's evident from the charts that U.S. Treasures need to rally up, as I noted with the chart of TLT (the U.S. bond ETF) recently. If TLT and Treasuries fall under their 200-day moving average, that's part of the sign that many traders are looking for to go short on the idea that another leg down is underway. However, if it's the case that cycles are saying U.S. bonds can move higher, they need to get started! Otherwise, if we do see another leg down but the 10-year T-note stays above that 115-116 area, then perhaps that will be a consolidation that allows yet another rally up in Treasuries.

Sure, I wasn't born yesterday, I'm well aware of the fundamental reasons why U.S. Treasuries are in peril of dropping lower and not looking back. On the other hand, I could think of other reasons why Treasuries might rally instead (sooner or later), into the C-wave up that Tony Caldaro's thinking of which is very close to my thoughts on U.S. bonds - if equities become really scary again, for example. But we don't need conjecture, we can just keep an eye out. After the long consolidation we've seen, bonds are likely to make a significant move soon. I'm just recommending that anyone following or trading the bond markets make sure to be on the right side of whichever direction this upcoming move takes. And, if it does happen to be a drop to the downside, we'll have to see whether or not the 115-116 level in $UST provides support.