McClellan Chart In Focus: Bond Yields Stretched Far From Oil’s Message – By Tom McClellan

 

Back on July 10, I wrote in a Chart In Focus article that there was an “Upturn Ahead for T-Bond Yields”.  And we got a small upturn then.  But that small upturn in yields was more than eclipsed by a huge drop in bond yields to historic lows, as U.S. yields were affected by the rest of the world’s bond markets going mad. 

Several countries’ sovereign debt instruments are trading at negative yields, meaning you pay for the privilege of someone else holding your money for you for years.  And so as investors look around trying to find somebody to pay them anything, that has pulled down U.S. yields in sympathy. 

Crude oil’s 3-week leading indication had said that we should expect yields to fall somewhat in August, but it was nothing like the magnitude of what actually transpired.  So what we have is a situation where bond yields have danced the right dance steps, but with a magnitude that is not at all what was choreographed. 

We have seen this before.  Back in June-July 2016, there was another big yield drop which was almost as big as this one, and which went against what crude oil’s leading indication had said should happen.  What happened afterwards was that bond yields worked extra hard to steer themselves back out of the ditch, and so we got a larger than called for up move in bond yields.  That should be the outcome this time as well.

And just coincidentally, we had former Federal Reserve Chairman Alan Greenspan on CNBC Sep. 4, stating that he thought negative bond yields are coming soon to the U.S. in addition to other countries.  That is just the sort of comment that we see throughout history as marking the top tick or bottom tick of a move. 

And as that is happening, crude oil prices stand poised to break an important declining tops line.  Such lines tend to matter a lot in crude oil prices.  So assuming that crude oil prices break the declining tops line, and start trending higher, that is going to create additional pull higher for long term bond yields.

Tom McClellan
Editor, The McClellan Market Report

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Related Charts

Jul 10, 2019

Upturn Ahead for T-Bond Yields
Aug 30, 2019

Crude Oil’s 10-Year Message
Jan 09, 2019

Crude Oil Leads Bond Yields

Financial Markets and Political Commentary
 

Tags

, , , , , , ,

Related Posts

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.