10 Year Treasury Rate--Monday, August 23, 2010

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Ten year yields were not falling last week. Which may seem surprising to anyone who was paying attention to the financial media last week. What we actually saw last week was an excellent example of the behavioral finance principle that the market's perception of the present (and future) is actually a perception of the past. When New York traders got to their desk last Monday morning the ten year was trading at 2.62%. When they left on Friday it was at 2.61%. This morning it is at 2.63%.

Rates had begun falling below their June and July lows on Friday, August 6, the day of the last employment report. They continued falling throughout the following week and last Monday's open was a gap down from the previous Friday close. But basically by end of day Monday we had seen all of the decline. The action during the week might be described as range bound, with sellers coming in above 2.65% and buyers around 2.55%. There was a tendency to probe to the downside, but none of these probes resulted in continuation.

100820-1500-10yrday.gif

We can set up a possible Fibonacci pattern on the daily chart with a base formed from the low in late May (around 3.10%) and the high in early June (around 3.42%). Projecting extended targets downward we get theoretical targets at the 1.618 and 2.618 levels. The 1.618 target was approximately 2.90%. And we find that this level formed a floor through all of June and July--indeed, up until the breakdown on the day of the employment report.

The 2.618 target would be around 2.57%. Did we see that level come into play last week? A look at the daily chart shows that while rates probed below that level, most activity remained above it.

This is not to say that it is time to call a bottom in rates. But it is likely that we will see at least sideways action and probes to the upside in the near future.

100820-1500-10yrday-a.gif

If the decline were to continue this same Fibonacci pattern would call for the next target at the 4.236 level (1.618 to the third power). That would take us to 2.04%


Pop Goes the Wheat Bubble

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A weekly chart of the nearby wheat futures shows an almost perfect example of the Fibonacci price pulse developed by Tony Plummer.

An alpha-beta base formed between November of 2009 and May of this year would call for a theoretical target for an impulsive move at the 2.618 Fibonacci level, a little over 8.39 a bushel.

The high on Friday was 8.41.

A weekly chart from Friday:
100806-1500-zwu10Weekly.gif

Since then the sell off has been quite dramatic, approaching the next level down in this pattern--the 1.618 level--in overnight trading. The low today was around 6.84. The 1.618 level is around 6.81. This seems to be holding as an initial support level.

10 Year Yield--Wednesday, July 14, 2010

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Playing around with some Fibonacci patterns on a weekly 10 Year Yield chart.

First, a pattern noticed during the impulsive move from March to June of 2009:
100714-0942-10yrweekly.gif
An alpha-beta base formed from the January low to the March low was followed by an impulsvie move up to approximately 4.00%. The 2.618 Fibonacci target of this pattern was 4.008%, the actual high at 4.014%--a 0.6 basis points difference between target and actual high.

The pattern since that time seems to be a 3 wave non-impulsive correction of the move in 2009 to 4.00%. If that is the case we are currently in the C wave down.

Some potential targets for this C wave:
100714-0942-10yrweekly-a.gif

Another:
100714-0942-10yrweekly-b.gif

EURUSD--Wednesday, July 7, 2010

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The pattern suggested in a post last Friday has worked itself out. The theoretical target was 1.2662, The high yesterday was 1.2661. Since then EURUSD has sold off more than 100 pips.
100707--0635-eur2hr.gif
In this chart we see an alpha-beta base formed the last 2 days of June. This would call for Fibonacci targets 1.618, 2.618 and 4.236 times this base. The 2.618 target (1.2482) was hit on July 1, then a few hours later surpassed. After that it twice proved to be support, making it more likely that the pattern would continue to the 4.236 target at 1.2662.

Interestingly, if one projects the distance of the original alpha-beta base down from the 4.236 target level--
100707-0829-eur30min.gif
--there is our support level this morning.

USDCHR--Friday, July 2, 2010

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Yesterday morning I posted this chart--
100701-0633-chf8hr.gif
--in which I posited support coming in right below 1.06.

We reached that target yesterday afternoon.
100702-0729-chf8hr.gif

A look at a 30 minute chart shows how that Fibonacci level has so far stopped the bleeding in USDCHF.
100702-0807-chf30min.gif

If this level does not hold, and the current impulsive pattern down continues, the next target would be below parity.
100702-0729-chf8hr-a.gif

EURUSD--Friday, July 2, 2010

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A quick look at a 30 minute chart on EURUSD, showing an impulsive "price pulse" off a base formation formed Wednesday and early Thursday.

100702-0837-eur30min.gif

Late yesterday we met the 2.618 target around 1.2480. The next target in this pattern is circa 1.2660.

That also correlates with a target in a (potential) higher order pattern shown in this 8 hour chart:
100702-0848-eur8hr.gif

If this pattern proves valid, and the current EURUSD recovery continues, we would look for the following targets:
100702-0848-eur8hr-a.gif

USDCHF--Thursday, July 1, 2010

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A quick update on a pattern in USDCHF explored in a post 10 days ago:

100701-0633-chf8hr.gif

We have had support at the 1.618 and 2.618 Fibonacci levels. The next expected support should be right around the 1.06 level, which would be the 4.236 (phi or 1.618 to the 3rd power) level.