Johnny Cash’s famous song best describes the major (long-term) trend of US 30-year T-Bonds (ZB), “…fell into a burning ring of fire. …went down, down, down and the flames went higher…” While there are a number of markets with unclear long-term trends, the ZB is not one of them. Despite an uptick at the end of November on this monthly close-only chart, with the Dec contract finishing at 173-25, the downside target range remains 165-13 to 154-31. And with monthly stochasitcs still near mid-range, in the 40% to 50% area, the ZB has ample bearish momentum to take it lower.
Here’s where the downtrend in ZB and the breakdown of the US dollar index get interesting. Lower bond prices reflect rising interest rates that theoretically should support the USDX. However, as of the end of November both were still in major downtrends. To make the inter-market analysis situation even murkier, COMEX gold is also in a major downtrend on that market’s monthly chart. This is not a normal scenario, or maybe it’s what we can consider normal these days.
P.S. For additional reading on my view of the overall market cycle, see my Weekly Column from September 19, “Ebb and Flow”.