10-Yr U.S. Treasury Notes (TY) Futures Technical Analysis – September 4, 2014 Forecast

The main trend turned down on the daily chart on Wednesday when the December 10-Year U.S. Treasury Notes took out the last swing bottom at 124’30.5. There was no acceleration to the downside because of a cluster of support. This encouraged enough profit-taking to fuel a strong short-covering rally into the close.

Although the main trend is down, the strong close suggests there may be a slight upside bias on the opening today. Watch for volatility to pick up when the U.S. cash market opens because of sensitivity to U.S. economic reports and the European Central Bank announcement. Position-squaring ahead of Friday’s U.S. Non-Farm Payrolls report could also fuel some volatility.

Technically, the main range is 123’12.5 to 126’12. The retracement zone formed by this range is 124’28.5 to 124’17. T-Notes tested this zone successfully on Wednesday when the market traded down to 124’24.5. In addition to the 50% level at 124’28.5, support was also provided by a long-term uptrending angle at 124’28.5 today.

Besides the powerful reversal to the upside, T-Notes also closed on the bullish side of a downtrending angle at 124’30.5 today. The close over this level likely means a firm opening today. This could bring in the buyers who may drive the market into another angle at 125’14.5.

A break back under 124’30.5 will be the first sign of weakness. However, don’t look for an acceleration to the downside unless the uptrending angle at 124’28.5 is taken out with conviction. If this occurs then look for the selling pressure to take the market to at least 124’17.