30-Yr U.S. Treasury Bonds (US) Futures Technical Analysis – October 9, 2014 Forecast

December 30-Year U.S. Treasury Bonds inched higher on Wednesday but the market closed only marginally higher. T-Bond investors face a difficult situation. Many of them covered shorts earlier in the week as they took protection against the steep drop in stock prices. Some speculators even went long the flight-to-safety rally.

Yesterday’s dovish Fed minutes triggered a huge reversal to the upside in the stock indices. If stocks continue to rise then those traders who bought T-Bonds may decide to take profits on their positions now that equities look like they have turned the corner.

At the same time these traders will be selling, those who have interpreted the Fed minutes as dovish may decide to go long T-Bonds. This clash in strategies could cause volatility and a possible two-sided trade.

If T-Bonds remain in the hands of strong buyers then look for the rally to continue. The daily chart indicates there is room to the upside until 141’30 to 142’04.

If sellers take control then look for weakness to develop under 140’16. This could trigger a fast break into 140’11. If this price fails then look for selling pressure to drive the market into the next uptrending angle at 139’11.

The most important uptrending support angle comes in at 138’29.  

The tone of the market today will be determined by trader reaction to the August 28 top at 140’16. This price should act like a pivot.