wmeubank@ocp.kcmo.com
U.S. TREASURY BOND
TECHNICAL ANALYSIS
Prepared by Technical Data
A Division of Thomson Financial Services
Trending action in the U.S. bond market began to taper off about mid-year 1996. Since that point, bonds have been confined to just under a 100-basis-point range, relatively small compared to the approximately 240-basis- point range set since late 1993. That doesn't mean there haven't been profitable trading opportunities, but it's a very good bet that less money has been made by traders during the past year due to the relative magnitude of swings being on the decline.
The slowing of volatility has changed the nature of signals generated by monthly charts and studies. Generally speaking, monthly charts of T-bonds are mostly immune to modest shifts scored by the market. Because the Treasury market exhibits a good deal of "trendiness" and because of their inherent longer-term nature, signals are relatively long-lived while whipsaws are infrequent. In the case of Treasury bonds, the last bullish signal occurred in October of 1996. This signal did end prematurely, however, scoring only two higher (monthly) bars before slipping in December as prices turned down. With a close in June at or near current levels, a new bullish signal for July is expected. Long- term monthly studies like the MACD histogram were previously unable to break below neutral (zero) levels, and continuation higher is to be expected from this new move.
An eventual push past peaks of 1993 and late 1995/early 1996 should not be dismissed as out of hand, although such a thrust is not expected imminently. Average cycle length for major trends in the U.S. bond market dating back two hundred years is actually a shade over thirty years! Credit markets hit their last extreme in late September of 1981 (long-term rates of about 15.25%), so chances of the trend to lower rates being over (in less than sixteen years) would go against the historical record.
In the near term, the 6.30 to 6.50 zone looks to be formidable resistance. Major support is on approach of 6.88, this year's highest volume tick to date.
July, 1997Joel Marver, Chief Technical Analyst
Technical Data
A Division of Thomson Financial Services
22 Pittsburgh Street, Boston, Massachusetts
Added to the WWW 07-05-97
Last updated on 07-05-97
Hosted by:
One Crossroads Place
610 West Maple Ave, Suite WWW
Independence, MO 64050
(816) 252-4080
sysop@kcmo.com