The current chart analysis on TradingView for the US10Y (U.S. 10-Year Treasury Yield) indicates a pivotal moment in the market, suggesting the completion of the 4th wave on the 21-weekly EMA (Exponential Moving Average). A bullish candle, characterized by a long wick touching the 21-weekly EMA, has formed, signaling a potential trend reversal. The expectation is for the initiation of the final 5th wave, marking the conclusion of the first bullish phase and the beginning of a correction in yields.
Technical Analysis:
1. Chart Patterns:
The formation of a bullish candle with a long wick touching the 21-weekly EMA suggests a strong support level. This pattern often precedes a bullish continuation, indicating a potential upward movement in yields.
2. Wave Analysis:
The completion of the 4th wave on the 21-weekly EMA sets the stage for the commencement of the 5th wave. In Elliott Wave Theory, this could signify the final phase of the bullish cycle.
3. Trend Reversal Indicators:
The confluence of the long wick, touching the 21-weekly EMA, serves as a technical indicator of a potential trend reversal. Traders often interpret such patterns as a shift in market sentiment.
Market Implications:
1. Interest Rate Stability:
The completion of the 5th wave suggests that interest rates may stabilize at the current level. This implies a pause in the downward trend and a reluctance for rates to move lower in a trending fashion.
2. Future Rate Hike Expectations:
The analysis leads to the anticipation that the rising rate campaign will likely continue into the following year. This marks a notable shift in the financial landscape, signaling the end of an era characterized by historically low to zero base rates.
3. Challenges for Banks and Consumers:
The changing interest rate environment poses challenges for both financial institutions and consumers. With the cost of debt becoming more expensive, banks may face difficulties, and consumers will need to adapt to a higher cost of borrowing.
4. Impact on Spending and Bankruptcies:
As borrowing costs rise, consumers may curtail spending, impacting economic activity. Those operating with minimal financial margins could face challenges and may need to secure additional capital to weather the changing financial landscape. This, in turn, could lead to an increase in bankruptcies.
5. Projected Timeframe:
The anticipated completion of this move is projected to occur by the 24th of January. This relatively short period suggests a potentially rapid and decisive move, adding a sense of urgency to market participants.
6. Dollar Strength and Stock Market Impact:
The conclusion of this move is expected to coincide with a rapid ascent in the U.S. dollar. Simultaneously, the stock market may experience an aggressive decline. This dual movement could be a result of shifting capital flows as investors adjust their portfolios in response to changing interest rate expectations.
Conclusion:
As the financial system enters a new era, characterized by a changing interest rate landscape, banks and consumers alike will face challenges in adapting to the evolving economic conditions. The impact on spending patterns and the potential for increased bankruptcies underscore the importance of vigilance and strategic planning in navigating the shifting financial terrain.
Disclaimer: This analysis report is for informational purposes only and does not constitute financial advice. It is recommended to consult with financial professionals and conduct thorough research before making investment decisions.