As a follow up to a previous post about the bond market, I have posted this 60 minute chart of the 30 yr bond. I know there are varying levels of experience in the reading base of this blog.
For those with trading experience you will quickly recognize the classic "bearish divergence" situation developing here. We have a new high in price, that is not being accompanied by a new high in the indicator below.
The indicator below, is not a goofy oscillator of the MACD type. It is an indicator that measures inside (professional) buying and selling. If you combine this with the price being at a key level of 10814 that I had mentioned before, a retracement in price could easily occur here. Divergences like this can move along for awhile, but rarely does a reversion not happen, once these set up.
It has been my experience that a full basis point reversion happens most of the time, once these types of divergences set up. This is not enough to just blindly go out and short this market. I have done that in the past and had my ..... handed to me as the rallies carried on. However, it is a starting point to look for other reasons for a short entry. If other things pattern wise and fundamentally line up, this can be a nice confirmation tool for the trade. It is even more valuable on higher time frames such as daily and weekly charts.