What’s Odd About The Chart Pattern


What do you notice when you look at the 10-year U.S. Treasury yield chart? Well, for one thing, it’s been in a major downtrend as in “lower and lower” until lately. If you examine closely though, here’s another feature: it looks like those spots where the yield gaps down are often returned to.

Is it just random? I don’t know. You might need a randomness expert like Nassim Taleb to research this type of oddness. In the meantime, you can see for yourself how obvious it is – at least since late 2016. Take a close look at the yields chart of the 10-year U.S. Treasury when viewed on a weekly time frame:

The first big gap up in yields comes in the late October, 2016 period when it skipped from 2.10 to 2.20 without stopping at the in-between levels. I’ve used the small red circles to indicate where the space between yields shows up. Then, by mid-summer of 2017, the yields slowly returned to the gap area before continuing higher and peaking out at 3.2 in October, 2017.

That’s the first instance of a gap getting filled on this chart. Then, it happens again on the way back down.

The late July, 2019 level at 1.85 suddenly drops to just above 1.79 – those in-between spots are skipped as the yield continues to slide all the way down to below 1.5 by September, 2019. Then, in a very short period of time, the gap from July is filled by mid-September as yields rise again.

That’s the weekly chart. If we move the view to the daily, the same phenomenon appears. Take a look:

The gap down level in March is returned to and filled in one month later. The late May gap down is filled in a few weeks later in June. And that big gap down at the beginning of August has now been returned to and filled, in dramatic fashion I would say, by mid-September.

Typically, gaps on charts appear after hours or overnight when some type of news (what the Fed chairman says, for example) changes the consensus thinking among large groups of traders or investors. The sudden change in bond prices shows up on the yields chart.

As I say, you’d want to do a more thorough analysis of this type of chart action in yields before drawing conclusions. It may be as random as it gets. The main thing is: gaps have been getting filled lately on 2 time frames in this one major investment measure highly related to the bond market.

Here’s my guess: someone with a highly-sophisticated artificial intelligence pattern recognition program has noticed. Just guessing.

For more information on the identification of and the use of gaps in chart reading, you can find Investopedia’s explanation of the phenomenon right here.

I do not hold positions in these investments. No recommendations are made one way or the other.  If you’re an investor, you’d want to look much deeper into each of these situations. You can lose money trading or investing in stocks and other instruments. Always do your own independent research, due diligence and seek professional advice from a licensed investment advisor.

2019-09-15 12:08:00

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