Into Thin Air

Yields on the Ten-Year Note ended the week just beneath a Hidden Pivot resistance at 4.49%, but the damage had already been done with the slight penetration of the resistance earlier in the session. If the rate had settled above it for a second consecutive day, I’d have shortened the odds of a further run-up to the 4.75% target to even money. As things stand, I’ll use a voodoo # at 4.62% as a minimum upside target for the near term. We’ll be better able to assess the odds of new highs at that time.

On the weekly chart, the futures have been on a ‘mechanical’ sell signal since mid-June. They seem in no hurry to do what they ought — i.e., fall to the modest, 6959.00 target of the pattern shown.  That would equate to a 7.5% correction from these levels and 9.5% from the record-high 7694 notched in the first week of June. That’s the worst I could see at the moment, and it would be the kind of garden-variety correction that would draw in buyers who have been waiting for a token discount. But fear? Not hardly. The low would likely come in the middle of August, however, leaving enough time for plenty of fear to develop ahead of the November elections. Fear of what, you ask? The possibilities are too numerous to predict, so let’s focus instead on ways to chase boredom during what promises to be a dull, glum summer on Wall Street.

Last week’s dip below the red line (p=68.75) amounted to just 2.4%, but that’s enough to somewhat darken the picture. For starters, it implies that a rally to the green line (x=73.44) should be shorted with a 78.15 stop-loss just above the pattern’s point ‘C’ high. (I am recommending this trade only to subscribers who are adept at fashioning risk-averse, ‘camo’ entry triggers.)  It also opens a path to the 59.35 ‘D’ target. However, given bears’ struggle to push quotes below p=68.75, a slide to 59.35 is still no better than an even bet. But p2=64.05 is likely to be reached, and we should plan accordingly.