McClellan Chart in Focus: T-Bond Blowoff Top Signaled – By Tom McClellan.


Chart In Focus

Chart In Focus

T-Bond prices have had a nice run upward since the lows in October and November 2018, but now we are seeing an important indication of a blowoff top, suggesting bond prices will not be able to continue higher from here. 

The indicator in this week’s chart is a Ratio-Adjusted McClellan A-D Oscillator for high grade corporate bonds.  The A-D data as well as the determination of which bonds are high grade is as provided by FINRA.  And see this article for a description of the difference between a Ratio-Adjusted McClellan Oscillator and the classic version. 

Like the McClellan Oscillators for the NYSE and Nasdaq markets, this one for high grade corporate bonds tends to go positive in uptrends, and negative in downtrends.  And it also can show us overbought and oversold conditions.  Right now we are seeing a really overbought reading, among the highest of the last 3 years.

A really high McClellan Oscillator for the NYSE tends to be an indication of strong initiation of a new uptrend, and it is usually not associated with the final price high.  But it works differently for these bond A-D data.  In the case of this one for high grade corporate bonds, the very highest readings like this are pretty uniformly associated with blowoff tops in T-Bond prices.  The highest reading for this Oscillator may not coincide with the exact day of the final T-Bond price top, but it is in the right area. 

Bond prices have surged higher as bond yields have fallen, and that drop in long term yields matches the drop in crude oil prices 3 weeks earlier, which is a principle I discussed here.  Oil’s leading indication for bond yields has been a big feature in our Daily Edition recently, and it too agrees on the idea of a pause here for bond yields.

Tom McClellan
Editor, The McClellan Market Report

Related Charts

ct 27, 2017

Bond McClellan Oscillator Almost Oversold
Dec 01, 2016

McClellan Oscillator for Corporate Bonds
Oct 16, 2015

McClellan Oscillator Interpretation


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About the author

Sherman and Marian's son Tom McClellan has done extensive analytical spreadsheet development for the stock and commodities markets, including the synthesizing of the four-year Presidential Cycle Pattern. He has fine tuned the rules for interrelationships between financial markets to provide leading indications for important market and economic data. Tom is a graduate of the U.S. Military Academy at West Point where he studied aerospace engineering, and he served as an Army helicopter pilot for 11 years. He began his own study of market technical analysis while still in the Army, and discovered ways to expand the use of his parents' indicators to forecast future market turning points. Tom views the movements of prices in the financial market through the eyes of an engineer, which allows him to focus on what the data really say rather than interpreting events according to the same "conventional wisdom" used by other analysts. In 1993, he left the Army to join his father in pursuing a new career doing this type of analysis. Tom and Sherman spent the next 2 years refining their analysis techniques and laying groundwork. In April 1995 they launched their newsletter, The McClellan Market Report, an 8 page report covering the stock, bond, and gold markets, which is published twice a month. They utilize the unique indicators they have developed to present their view of the market's structure as well as their forecasts for future trend direction and the timing of turning points. A Daily Edition was added in February 1998 to give subscribers daily updates on their indicators and also provide market position indications for stocks, bonds and gold. Their subscribers range from individual investors to professional fund managers. Tom serves as editor of both publications, and runs the newsletter business from its location in Lakewood, WA.