What a phrase. In this business we hear this phrase a lot, and the answer is usually no. The allure to thinking it is different this time materializes because there are so many variables at play in any market that we can almost always find a few data points that we can focus that make us believe it is. I think any good student of the markets has been in this situation one time or another; I know I have.
At this moment the voices are growing about this time being different when it comes to yields. The problem is I have heard this same mantra many times in my 19 year career in this business and it hasn’t been different yet. Maybe this is the big one, or maybe not. Either way, my work is showing that even if it is, right now may not be the best time to jump on that bandwagon.
Looking at the $TNX below I want to start with the weekly chart going back almost 20 years (my data only goes back to January 1994). The 10yr yield has been in a very clean falling channel for that entire time. There are charts out there that show it goes back a good bit further too.
According to this chart we are only half way through that long term channel and already hitting momentum readings that we have only seen a few times over the last two decades. RSI has made its way up in the 70s which is rare for a vehicle like this on a longer term chart. Even more surprising showing the short term power of this move, we see CFG sitting at 118 which we haven’t seen since late 2010 (the last time I heard this time was different). These are extremes, but they can go higher. That said, they are not likely to stay up here long.
Now dropping down to the daily you can see this chart is showing extreme readings as well.
With a daily RSI nearing 80 and the CFG piercing 100 after a previous high over 130 there is a good potential for a divergence there corresponding with the RSI peak. I say potential because it is not a divergence until we see it turn down, but if it does this could be our short to intermediate term top. Each time we have seen peaks from these levels on the weekly chart, even if not the ultimate top, we had a very tradable pullback lasting weeks to months, not days. And when you add the setup in the daily chart, I don’t believe now is the time to be dumping your bonds.
Of course with us only half way through the channel, we are a long way from this time being different, but the level of banter out there right now would have you believe we have already broken out. We haven’t. Actually, we haven’t even broke the shorter trendline I drew from the 2007 levels (actually rejected at it yesterday). For most of us, there is no need to make a long term bet here right now. Leave that to the financial talking heads. Let these levels come down some and see where they land. Actually you may even be better off buying here than selling for a trade while we work off these extremes.