December 16, 2010 11:24 ET: US-GERMAN 10 YR YIELD SPREAD (US minus German) breaks further above its 200-day MA) for the 1st time in 5 months (see chart http://chart.ly/ 2hkhsyi ) The daily chart shows the spread has formed a possible Head & Shoulder formation, with the right shoulder around 45-50 bps, which means that a CLOSE ABOVE 50 bps would be necessary to invalidate this potentially bearish formation. Some may say a close only needs to be above 0.43-0.44 bps for the shoulder to be broken. So while the media emphasis is on soaring US bond yields, we must focus on the US-GE spread, whose daily correlation with EURUSD stands at -0.80. My bearishness on EURUSD remains intact since Nov 23 as all of the technical conditions have held up (55-WMA and Nov trendline). I first mentioned $1.27 in this video (after 4:00 mins) http://bit.ly/ ePEvbf and highlighted the importance of bond yields on this Dec 1st CNBC interview http://bit.ly/hjjlZB
December 16, 2010 14:44 ET: WHEN ALL IS SAID & DONE, EURUSD' s November candle is the BIGGEST bearish monthly REVERSAL since the creation of the currency. There were only 3 of such major monthly reversals since Jan '99. Read carefully, I said bearish REVERSALS, i.e. an opposite move occuring at the TOP of the uptrend. And we all know what significant reversals mean (both bearish & bullish reversals).
Comments