30-Yr U.S. Treasury Bonds (US) Futures Technical Analysis – October 8, 2014 Forecast

Flight-to-safety buying because of the steep drop in equity prices, helped drive December 30-Year U.S. Treasury Bonds sharply higher on Tuesday. The close near the high suggests there may be enough upside momentum to continue this rally, but since the move is being fueled by the stock market, it should be watched for direction. T-Bond traders are being reactive so the direction of the stock indices will move them.

On Tuesday’s the buying surge took out the August 28 top at 140-16. If the upside momentum is strong enough then look for a drive into the possible resistance cluster formed by the steep uptrending angle at 141’29 and the September 2014 T-Bond contract high at 141’30.

If stocks continue to sell-off in a volatile manner then the ultimate target will be the May 1, 2013 top at 142’04.

Crossing back under 140’16 will indicate that yesterday’s breakout move was triggered by short-covering rather than new buying. With many traders should because of the threat of an interest rate hike by the Fed, most of the current rally is being fueled by short-covering. So when stocks stop going down, T-Bonds are likely to turn lower.

Trader reaction to 140’16 will likely set the tone for today’s trading session. On the downside, the nearest support is a steep uptrending angle at 138’21. When stocks eventually stabilize, prepare for a steep decline by T-Bonds.