This week’s most important chart to watch is the yield on the 10 year Treasury bond (symbol: $TNX.X). See figure 1 a weekly chart.
Figure 1 $TNX.X/ weekly
This week’s QE3 announcement has finally woken up the bond vigilantes. QE3 that is significant in scope, non- sterilized, and open ended has stoked inflationary pressures, and yields have moved higher accordingly.
From a technical perspective, there are several clues that this move in Treasury yields may be significant. The close below the 1.539 pivot and the subsequent close back above that pivot has catapulted prices back above prior resistance levels at 1.869 to 1.897 (by 0.01 cents) and above the down sloping 40 week moving average. The price yield finds itself is back inside the down sloping trend channel. 2.475% yield on the 10 year is not out of the question. Rising yields is the biggest risk to the equity rally.