In my November 2^nd analysis of the bond market “Close To A Top In Yields?” there were technical signs that the yield on the 10-Year T-Note was likely to move lower. As discussed later these were very similar to the signals in early August that yields were likely to move higher.

As we enter the New Year the key question is whether the yield on the 10-Year T-Note is likely to move lower or higher in early 2023.

When looking at the path for interest rates I like to first look at the long-term trend based on the monthly analysis. In October 2022, the yield closed at 3.804% which was well above the resistance that goes back to 2013, line 3. The yield closed above the monthly starc+ bands for the next two months with a high of 4.333%.

In December the breakout level, line a, was tested with a low of 3.402%. The monthly MACDs and MACD-His have done a good job of timing the turns since they turned negative, line b, at the end of January 2019. The yield declined from 2.635% to a March 2020 Covid low of 0.398%

The MACDS turned positive in January 2021, line c, at 1.093%. That was the start of a two-year move higher in yields that peaked in October 2022. The monthly MACDs are positive and still point to higher yields as they show no signs of topping out.

The yield had several weekly closes above the starc+ band (see arrows) before they peaked. This warned of the decline in yields and the test of support, line a, in the 3.454% area. Yields now have further resistance in the 4.000% to 4.021% area along with the weekly starc+ band.

The MACD and MACD-His turned negative in late November but are now both turning higher. Typically, it would take several weeks before they could turn positive. A drop in the yield below 3.400% would call into question the recent rebound and suggest a possible test of the support at 3.3316%, line b. The longer-term support, line c, is in the 2.801% area.

For most traders and active investors, the daily yield analysis often has more relevance. The 10 Year T-Note yield bottomed in early August which pressured the middle of the month, it played a role in the market correction as the S&P 500 peaked on August 16th. From August 8^th until the end of September the MACD analysis was positive consistent with the move higher in yields.

By the October 21^st high in yields at 4.333% there were early signs of a top as the MACD (line c) and MACD- His formed lower highs. The decline in yields at the end of October turned the indicators negative which made me confident that yields were likely topping.

By early December, there were signs that yields might be bottoming as the MACD-His formed higher lows and a bullish divergence, line d. By December 19^th the MACD analysis had turned positive with the yield closing at 3.581%. Yields gapped higher the next day and closed Friday at 3.879% as the downtrend from October and November, line a, has been slightly overcome.

Over the near term, a pullback in yields would not be surprising with the rising 20-day EMA at +3.710%. A drop back to this level would get the market’s attention. This view is consistent with the fact that the MACD-His has declined over the past two days.

Given the positive monthly analysis, the major trend still points towards higher yields. The weekly and daily charts have illustrated there can be some significant swings within that monthly trend. I think the next six weeks will be important as if the weekly MACDs fail to turn positive by then it may weaken the monthly analysis.