Peak Bond Yields to Signal Peak DXY and Bottom in Metals and Miners

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BONDS / TLT

October 24 was the day TLT bottomed at 91.50 on a closing basis, 90.95 intraday. The same day, the 10Y closed at a peak of 4.23% after closing at 4.33% on an intraday basis the day before.

Focusing on the closing prices, I believe we’re in an A-B-C correction from the peak at ~109 on December 7. Waves A and B have been completed and now we’re heading down in wave C. A standard wave C = wave A retracement signals the bottom in TLT at ~98.72 on a closing basis (~98.65 on an intraday basis). By contrast, this is around 4.11% in the 10Y or lower.

The daily RSI in TLT is heading towards an extreme oversold level of 30. We may even get a positive divergence when it bottoms.

The MACD Histogram has been trending down in the short-term, but having come off its lowest level since March 2020, the set-up is clearly there for a positively divergent lower low.

The MACD Line is likely to continue its trend lower, but the weekly MACD Line below negates this because it is clearly heading higher, confirming the entire thesis of lower yields ahead.

In fact, the RSI and both MACDs are coming off their lowest levels on record in TLT, going back to TLT’s inception in 2002, with plenty of room on the upside.

In summary, TLT could go a little lower and the 10Y yield a little higher, supporting the DXY, before they all head in the opposite direction very, very soon. Best guess, the turn begins in the first half of March.

This would coincide with bottoms across the complex in precious metals and miners, if not before.

As always, a stock market crash or some other exogenous surprise are the only caveats, but based on the data in hand, Gold, Silver, and the miners are getting ready for blast off!