US 10-year rate. Elliott wave possibilities

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US 10-year rate. Elliott wave possibilities

United States 10 Year Government Bonds Yield TVC:US10Y


The US 10-year yield has pulled back from 3.50% to 2.75%, which is a sizeable drop by any stretch of imagination. The Fed has clearly said its current focus is on price stability and with yesterday’s employment numbers, there is still little reason to believe that fears of a so-called slowdown, or even worse – a recession, are showing up in high frequency data that the central bank is using, atleast for now (or they have the data, but because of political pressures, continue to focus on containing inflation ).

The vertical drop in commodities has been puzzling no doubt; in fact the descent has been so quick that most people are aligning towards the fact that Fed forward guidance of more hikes (it remains to be seen whether existing measures of tightening policy are having the desired effect) are showing signs of demand destruction. I think for the Fed to acknowledge that a recession is a bigger worry than growth (at a certain point of time in the future), they would like to see a consistently southward CPI print which shows credible signs of not being sticky on the downside. For now, I believe they are simply taking back all that they made available in terms of additional QE to pull the world economy out of the Covid led crash.

Tactically, the visit to 2.75% was fleeting — that was a key support level , so the market comfortably vaulted past 3% on employment gains that were more than expected. These moves have now resulted in the market dangling at a critical juncture which I will try to address via the three best Elliott wave counts I have conjured up (the right to be wrong is exclusively mine, and so is the right to adapt quickly to what the market might be doing regardless of what I think it should do) given the presently available evidence. All three counts start from the July 2021 lows — the count from the 2020 crash lows of 0.34% has not been used for the sake of this analysis (which suggests the bull market in yields has much longer and higher to go) but that’s a separate discussion altogether.

Primary Count: Long term trend in yields higher and is very much intact, but more sideways churn is expected within a RUNNING TRIANGLE before a surge:
Requirement: 2.75% must hold for this to be valid labelling

Alternate count #1: Long term higher, but one dip below 2.75% is needed to meet the minimum requirements for w((4)) to end
Requirement: One more dip before a larger degree 5th wave targets 3.50% and higher; 2.75% can be broken or at the least, retested


Alternate count # 2: More aggressive count that suggests higher immediately, longer-term higher yields play
Requirement: 2.75% cannot be broken from here, not even by a tick as per the rules of the wave principle for an impulse


Conclusion: Regardless of which wave count is in play – we will know that as we have more information appearing from the right of the chart, the impulse up in yields is anything but done. Perhaps, inflation will remain sticky longer than the consensus view is.

— Guest Contributor at the @CMTAssociation