Bonds Yields May Have Bottomed

After four months of sliding, bond yields may be turning higher.

The first pattern on this chart of the 10-year Treasury Yield is the double-bottom around 1.128%. This corresponds to an oversold condition on the weekly stochastic, which has often marked bottoms for TNX.

Next is the price action in the iShares 20+ Year Treasury Bond ETF (TLT). It tracks longer-dated securities, but is a useful and liquid instrument that provides inverse signals:


Notice the rising trend line that began in early June and is now breaking. TLT also had a bearish engulfing candle on July 20 that served as resistance this week. In addition, Wednesday had a bearish hanging-man candle. Those patterns on TLT suggest the uptrend in bond prices is exhausted. (If correct, it means yields will move higher.)

This could be a big deal because early 2021 saw a dramatic shift toward value stocks and away from growth. Another move up in yields could revive that trend. Banks and financials in particular could benefit.

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