In recent months there’s been an inverse relationship between U.S. 30 – year Treasury yield/rate and the U.S. stock market. Rates rise stocks fall. The U.S. 30 – year Treasury yield (TYX) is now at a crossroad. What happens next week could determine the near -term course for U.S. stocks.
The 09/21/23 blog “Upside Target for U.S. Treasury Yield” noted the upside target for the post 06/26/23 rally was 5.665.
The weekly TYX chart courtesy of Trading View shows what happened.
On 06/26/23 TYX completed an Elliott wave – Horizontal Triangle that began in October 2022. The post 06/26/23 rally was presumed to develop in five waves forming Intermediate wave (5) completing a Primary degree wave up from the March 2020 bottom.
The post 06/26/23 rally did develop in five waves peaking at 5.152 below the 5.665 target. If this wave count is correct it presumes a Primary degree wave “2” – boxed is developing. If so, the decline could continue for at least a year.
Also note that after the TYX peak on 10/23/23 its decline has roughly corresponded to the rally of U.S. stocks.
There are always alternate wave counts. The daily TYX chart illustrates another potential scenario.
Most impulse waves contain what is called an extension. An extension is an elongated impulse with exaggerated subdivisions.
In this case the TYX 06/26/23 to 10/23/23 rally is just the first Minor wave of a still developing Intermediate wave (5).
A clue that this scenario could be developing is where the most recent TYX bottom occurred. A Fibonacci .382 retracement of the 06/26/23 to 10/23/23 rally is at 4.624. The 11/08/23 bottom was 4.633.
A significant move below 4.624 opens the door for a decline to the 4.40 area.
Watch for a move above the 11/09/23 high at 4.835, it could be an important bullish signal for TYX, and bearish for U.S. stocks.
Four Dimension Trading 