When we study charts, we talk about chances, not guarantees. So a clearer headline would be, “The Odds Strongly Favor That Bonds Have Bottomed.” This leaves the question of how important that bottom is, which we’ll cover later.
Right now, most traders are feeling very bearish. That mood can actually be useful if the market shows some upside. Thursday’s price move looks like a climax – a final big swing. It doesn’t prove that bond prices have hit a firm low, but it is unlikely we will see a lower close for the next few months.
Signs of a Turnaround
Chart 1 shows the iShares 20+ Year Treasury Bond Fund (TLT) making a bullish “outside day.” An outside day means the whole bar is bigger than the previous day and closes near the high. Thursday opened lower, showing sellers in charge, but by the close buyers had pushed the price above Wednesday’s high.
Outside bars are important when three things happen together:
- A sharp fall happened just before, so weak hands are gone.
- The bar is much wider than earlier bars, showing a strong fight between buyers and sellers.
- Volume is high, confirming the fight.
Thursday’s move checks all three boxes. The drop that came before was severe, as shown by a very low Relative Strength Index (RSI) that stayed in oversold territory.
Short‑term yields also showed a similar pattern. Chart 2 shows the 5‑year yield making an “outside bar” that covered several days, not just one.
The 2‑year Treasury also finished a “tower top” on Thursday. It still needs a break of the red support line to confirm a real reversal.
Even junk bonds are showing bullish signs. The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) ended its long decline with a “bullish hammer” pattern.
Chart 5 shows that HYG also had a huge selling climax, reflected by an extreme reading on the Percentage Volume Oscillator (PVO). In the past, two similar climaxes were followed by big price jumps.
The Bottom Line
It looks likely that bond yields have topped out and prices have found a low for now. Yet, Chart 6 reminds us that the longer‑term view is different. The 10‑year Treasury recently broke above a strong resistance level, and the long‑term KST indicator supports that move. If this break holds, yields could rise again before the current cycle ends.
Good luck and happy charting!
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