Wednesday is the next FOMC Meeting and Powell Press Conference. What if 10-year yield continues to climb into Wednesday's Policy Statement, asks Mike Paulenoff of MPTrader, who saw reason for caution.
Suppose yield backs up to 1.80%. Will Powell be concerned that the rapid climb on the long end is more than just a reflection of the anticipation of post-pandemic growth acceleration, and instead is destabilizing enough to invoke Yield Curve Controls (YCC)?
If my technical set up work is whispering anything to us about the projected path of yield (see my Daily Chart of 10-year yield), then the upleg off of the 1/27 low at 1.00% should be in its final thrust, and points next to 1.70%, where my pattern work is expecting a meaningful correction of the January-March upmove from 1.00% to 1.70%.
Based on such a scenario, my sense is that Powell could be about to throw some cold water on the red-hot rise in 10-year yield. If yield does correct into the 1.30% to 1.20% target zone, however, let's consider it a buying opportunity in TBT (a shorting opportunity in TLT).
Mike Paulenoff is co-founder of MPTrader.com, a live trading room featuring his analysis on the key market indices and bellwether stocks & ETFs.
