Long-Term Treasury Yield Setting Up for Powerful Advance

The daily chart of the 10-Year T-Bond Futures could be one of the most important charts we discuss entering 2010. Why? Purely from a technical perspective, let’s notice that three distinct instances in the last 12 months YIELD pressed to 3.50% or lower, only to see an upside reversal back above 3.50% very quickly thereafter. In other words, the “beachball effect” kicks in under 3.50%. With the foregoing as a backdrop, let’s also notice that YIELD has been DECLINING since June even though nonfarm payrolls have been improving. My suspicion is that the upmove since last Friday’s YIELD low (Dubai crisis) from 3.53% to 3.74% (+6%) might be in anticipation of much improved payrolls data (an outlier number) and/or changing perceptions of climbing inflation, climbing GDP, deficit financing, etc. Whatever the case, from my perspective long-term Treasury YIELD – and the UltraShort 20+ Year Treasury ProShares (NYSE: TBT) -- is setting up for a potentially powerful advance in the day and weeks ahead, which could find a catalyst in tomorrow’s Employment Report.

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