CBOE Interest Rate 10 Year T Note (INDEX CBOE: TNX) d/w/m

Friday 11/20/2015 was third Friday of the month options expirations. Now that that is behind us, we have the US Federal Reserve looking to raise interest rates … possibly in early December 2015.  Surprisingly, Mr. & Ms. Fickle Markets, unlike August, seems to be in agreement on a December Fed increase.  Also, the Fed is planning a go slow approach, wherein Fed rate increases are followed by pauses giving the collective Fed heads time to analyze and assess the effects, and affects, of the first rate increase to the USA’s economy, USA jobs, as well as the US dollar globally.

Why worry about interest rate increases?  

The debt markets, government, corporate, and consumer, are greater than the combined global stock markets.  To the debt holders, and debt hedgers (Swaps and Derivatives), the value of that debt varies based on the interest rates at the time the debt was negotiated and how interest rates fluctuate over time.  We do not have to worry, but we shouldn’t ignore what is happening in the debt markets, especially Swaps, and Derivatives,  … because it can, and will affect the USA and global stock markets.

Also, as far as the USA is concerned, the Fed rate increase could strengthen the US dollar against foreign currencies, undermining global commodity and especially USA companies’ product prices,  leading to lower sales, lower revenues, lost market share, and layoffs.   So, the Fed mandate to preserve and even create jobs, will be clearly at odds with the Fed raising rates simply for the sake of raising rates.

Mr. & Ms. Fickle Markets never seem to get it right either over-inflating … or over-correcting, depending on either rumors, or media talking heads, driving market sentiment.    

Here, I like to use the CBOE Interest Rate 10 Year T Note (INDEX CBOE: TNX) as a prime example of my last sentence above.  I was one of the first advising my readers that the TNX was way above, unsustainably above, its 200 day simple moving average  (sma), and that looking back through my databases and spreadsheets, I could see what was coming. … and probably when!

Looking back:

On 5/2/2013 the TNX closed at 16.31, 1.431 points below its 200 day sma, or -8.064%.  The following day rumors of a Fed rate increase surfaced …

On 5/3/2013 the TNX closed at 17.52, now only -0.232 points below its 200 day sma, or -1.309%.

The next couple of days saw Mr. & Ms. Fickle Markets battling over whether rates were going higher or lower.  On 5/8/2013, the TNX closed at 17.60, -0.196 points below the 200 day sma, or -1.103%.  Those looking for “lower rates” lost and I had a great view of the gap between the TNX close and its 200 day sma.

Between 6/19/2013 and 6/25/1013, only about a week, it looks like capitulation set in … on 6/25/2013, the TNX closed at 25.89, PLUS 7.243 points above its 200 day sma  … or +38.844% … prompting my warnings. 

On 7/5/2013, the TNX closed at 27.15, or +8.21 points above its 200 day sma or +43.348%. 

The TNX didn’t crash, it corrected, sideways, over time, on 2/24/2014, closing at 26.42, now -0.122 points below its 200 day sma or down -0.461%.  That was the first close for the TNX below its 200 day sma in nearly 8 months.

But we’re talking Mr. & Ms. Fickle Markets “over-inflating … or over-correcting,”   So, yes, there’s more:

After 2/27/2014’s TNX close, those convinced that lower rates, and maybe even another QE, were in order were back in a day to day, 5 week battle.

On 4/4/2014, the TNX closed at 27.26, 0.146 points below its 200 day sma, or 0.533 points … where it was going to stay, below the sma,  until 5/6/2015.

However, in that run, on 1/30/2015, I notified my readers, the TNX closed at 16.75, -7.373 points, this time unsustainably below its 200 day sma … or -30.565%.   I put those spreadsheet, and database, numbers, already in red, in BOLD face type, on that day.

You can observe some of what I am watching every day, as in

Index Support and Resistance for Monday, 11/23/2015

like this:

For the CBOE Interest Rate 10 Year T Note (INDEX CBOE: TNX) Closed 11/20 up @ 22.62

  • Pivot point    22.52
  •  Support (s1)  22.41      Support (s2)  22.21
  •  Resistance (r1)  22.72    Resistance (r2)  22.83
  •  Simple Moving Average (Close 50):  21.50
  •  Simple Moving Average (Close 200)  21.82
  •    Close (17 days) above/below (+/-) sma200  +0.802 (+3.674%)  
  •  :: 52 week performance -2.29%  YTD performance  +4.24%

Based on the Fed’s intent to make the first raise and pause … then this line is the most important clue to what Mr. & Ms. Fickle Markets is doing:

Close (17 days) above/below (+/-) sma200  +0.802 (+3.674%)  

 

CBOE TNX
CBOE TNX

The “d/w/m” in this blog’s title are an indicator that this blog includes a (1) Daily (d), (2) Weekly (w), and (3) Monthly (m) Chart Analysis.  It is good to hear about the charts but despite that charts are based in math and science, they are also open to interpretation, subject to the biases of the interpreter, and therefore interpretation is an art.

Whether you are a Bull, or a Bear, besides the  Databases and Spreadsheets, let’s look at what the charts may, or might not be saying:

CBOE Interest Rate 10 Year T Note (INDEX CBOE: TNX)

(1)  Analysis of DAILY chart activity through Friday’s 11/20/2015 close at  22.62
The current trend is up and all orders on the long side may be considered.  If already holding long positions, look to take partial profits on any retracement to 22.31.  Traders with remaining long positions, after profit taking, should consider placing capital conserving stops in the region of 22.25.   Be prepared for a potential short term price pull back to the 22.54 area.  By the way, prices are vulnerable to a correction towards 22.14.

Suggested placement of capital conserving stops:
If Long, exit all contracts at …     21.67
If Short, exit all contracts at …     23.77

Additional Daily chart info and analysis:

Note: One of my pivot point indicators gave a “Short Entry” signal on 11/10/2015.  A second pivot point indicator gave a  “Short Entry” signal on 11/12/2015. The MACD indicator rendered a sell signal on 11/18/2015.  While this chart shows extraordinary price action to the upside, 3 of 6 indicators are Bearish …

Moving averages
3 day (sma, red, dotted)      22.5967
9 day (sma, dk grn, solid)   22.8578
20 day (sma, red, solid)        22.3155
50 day (sma, purple, solid)  21.5044
100 day (sma, blue, solid)    21.8878
200 day (sma, green, solid) 21.5388
400 day (sma, grey, dot dash)  22.5832

  • Overall, the bias in prices is: Upwards.
  •  Short term: Prices are moving.
  •  Intermediate term: Prices are trending.

Projection Targets:

  •  The upper projected target is: 24.00.
  • The lower projected target is: 21.27.
  • The projected closing price is: 22.64.

Plez Note: these price projections are for reference only, and can be easily exceeded by Mr. & Ms. Fickle Markets.

 

(2) Analysis of WEEKLY chart activity through Friday’s 11/20/2015 close at  22.62
The current trend is up and all orders on the long side may be considered.  If already holding long positions, look to take partial profits on any retracement to 19.06.  Traders with remaining long positions, after profit taking, should consider placing capital conserving stops in the region of 19.06.   Be prepared for a potential short term price pull back to the 21.98 area.

Suggested placement of capital conserving stops:
If Long, exit all contracts at …     19.05
If Short, exit all contracts at …     23.77
(3)  Analysis of MONTHLY chart activity through Friday’s 11/20/2015 close at  22.62

The TNX has been in a down trending channel since an intra-month peak at 81.62 for the month of 11/30/1994.  The bottom of the channel tracks from 12/29/1995.

Be prepared for a potential short term price pull back to the 22.48 area.   The current trend is down and all orders on the short side may be considered.  If already holding short positions, look to take partial profits at  any retracement to 24.89. Traders with remaining short positions, after profit taking, should consider placing capital conserving stops in the region of 24.89.

Suggested placement of capital conserving stops:
If Long, exit all contracts at …     16.51
If Short, exit all contracts at …     26.42

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