Thursday, August 26, 2010

30 Year Treasury Bonds

The credit markets celebrated the full moon with a little volatility that resulted in what could potentially be a reversal day. This afternoon I posted a 20 year T-Bond chart with a Gann square arguing--albeit in an unorthodox fashion--for a top to be made near 127. Wednesday's high was 126.84 before dramatically reversing lower. The candlestick pattern--a doji followed by a huge engulfing bearish candle suggests that a top is in.

The 30 year Treasury reversed as well--forming a bearish engulfing line and hitting a conventional Gann Square almost exactly as well.
Gann Squares can be calculated as follows to determine natural support and resistance levels.
  • Take the low that the current cycle commenced from: in the case of the 30 yr. 114.34
  • Calculate the square root of 114.34--which is 10.6929
  • Add 1 to the Square root value: 10.6929 + 1 = 11.6929
  • Square the resultant sum: 11.6929 * 11.6929 = 136.72
  • Wednesday's high on the 30 year was 136.84, before reversing lower.

The chart below indicate the precarious position the U.S. Treasuries currently find themselves--gaps to fill--momentum divergence--bearish candlesticks--and over believed.

The risk reward parameters are fairly well defined for aggressive speculators.

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