UST's to rally?

Without going in to "bigger pictture" details of the 20+ year treasuries which you know I have special thoughts about even though they don't seem to have anything to do with reason, they do have to do with charts.

The 10-year vs the 30 has been the laggard and I've had no argument with anyone over that, I've highlighted it, but are we in fact about to see some sort of PPT or other intervention in the enormous Treasury market? There are some interesting 3C signals.

Take the 10-year, this isn't a long term signal like the 30's, but it is new to the 10-year.

First let me say that the "normal" correlation is Treasuries move opposite yields and the all-important 10-year's drop has set off a hike in interest rates for just about everything including mortgages as it is the benchmark. The price of Treasuries also "normally" moves opposite the market as Treasuries are seen as a flight to safety trade, when money flows out of treasuries, it's generally flowing in to a risk on move in stocks (rally) and when stocks are moving down, treasuries see money flowing in as the "Flight to safety " trade takes over.

However the correlation as of late has been very weak and that's due to changing Central bank policies and expectations of what happens next including the expectation that about 6 months AFTER the end of QE3, bond traders expect interest rates to be hiked by the F_E_D, Bernnie himself came out (which the market mistook what he was saying and applied it to QE as he was purposefully ambiguous after that round of very hawkish minutes came out) and said the F_E_D would continue to maintain "accommodative policy", the market took it as no tapering to QE3, I wrote that night that he was engaging in "Green-Speak", purposefully being ambiguous to let the market take it the way the market wanted to as the minutes released earlier in the day were killing the market until his after market comments stemmed that tide as traders thought "continued accommodative policy" referred to QE. I argued he was being purposefully general to let the market take it the way he knew the market would, but he was in fact talking about the period (extended) between the end of QE and when the F_E_D starts to raise rates too unwind accommodative policy, the next F_O_M_C meeting confirmed my view of that statement as the F_O_M_C sought to calm bond traders' fear that rates would rise too soon. However, that fear persists as you can see rates continue to rise as traders apparently just don't trust the F_E_D will hold off on rate hikes long enough.

The F_E_D's in a dangerous spot because in addition to removing QE (which only Congress and the market care about), a shock in rates would destroy any green-shoot recovery real or imagined, so its interesting we have 2 F_E_D speakers today, especially with the Treasury 10-year 3C chart which has consistently lagged behind the 30 year T-Futures until recently.

 This is a 1-day 3C chart of 30 year treasury futures, like TLT, something has been going on here ALL year that I can't explain, but I think it leads to an eventual large move up in the long end of the curve, again I can't explain it.

The 30 year 15 min chart has looked great in recent months, especially compared to the 10-year, here it doesn't look that great, at least not compared to the recent 10-year, there is a slight positive divergence though in the sub-intermediate or closer to near term.

 The 30 year 5 min chart has a small recent positive divergence that looks like it will move up soon, this to me "looks" like the F_E_D / PPT at work in the market to hold rates off, especially the 10 year's move to 3+%
 
Now, if you recall how in the past when I have featured the two Treasury Futures the 30 year has looked good and the 10 year, well the y10-year didn't look bad compared to the 30 year, it looked bad no matter what and has continued to move lower until we arrived at this morning's 5 or 6 basis point position away from 3%.

The 10 year 15 min chart has seen recent 3C strength, this looks like intervention in this huge market and other than PIMCO becoming EXTREMELY activist and even the world's largest bond fund probably doesn't have the power to stop this train on its own, the only others I can think of are the F_E_D and the President's Working Group on Financial Markets more commonly known as the "Plunge Protection Team".

 Here the 10 year's 5 min chart is leading positive, it looks like a fight will be put up to save the market from 3%.

And the 1 min 10-year chart, well it looks like a move is "imminent" or at least 3C support is incredible, perhaps just enough to hold the line.

This would usually mean the market would move to the downside with Treasuries (if they do) moving to the upside, I am using the 20+ year TLT because of the liquidity to show you the relationship between T's and the SPY.

To the left at the green arrows, the two have been moving together which is NOT normal, to the right they have been moving opposite more recently which is more normal.

A closer look at recent action shows the more traditional relationship. The truth is the T market has been doing its own thing and I'm not sure any correlation exists anymore for the time, but I would watch TLT and more specifically the 10-year for a helping hand to the upside, we'll have to see if it pressures the market lower.