From the January 01, 2012 issue of Futures Magazine • Subscribe!

Tech Talk: Big bond breakout/breakdown

The 30-year U.S. Treasury bond is setting up for a fairly dramatic move. The bulls and bears are currently in a fight for control of the key 141.27-17 area (see "Decision points"). If the bears win the battle for control, the market will test support at the late October low just above 135-00. If the bulls win, they still have some work to do. The March 2012 long bond will run into resistance at 142-25 based on a November double top before testing the Nov. 23 high of 145-16 and the all-time high of 146-19 set in September.

Point "C" on the chart shows the retest being made in early June of 2009 — note that all the ensuing trades into early July of 2011 stayed inside the range established by "A" and "C." So, it was the buyers in early July of 2011 who made the market do something different and established a new trading range from 122-15 to 146-19. Note that 134-17 is the 50% retracement of that move — a second target if trade continues through 135-00. A quick glance at the chart shows there is nothing supporting the market below that level until it reached the July low.

The purpose of technical analysis is not necessarily to spot exact tops and bottoms — that is too difficult — it is to spot low-risk/high-return trading opportunities. The long bond could be offering such an opportunity in the near future. Now just wait to see who wins the battle, and trade the market in their direction.

Some information presented is based on proprietary technical analysis.

Jack Broz trades from the CBOT floor and provides analysis on the bond market at TradeBondFutures.com.

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