Wednesday, June 6, 2012 >>

10-year U.S. Treasury bonds futures have been in a monster rally since 2008. You can see bond prices going higher as yields have dropped to a paltry 1.5%.

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The three lines I’ve drawn in this chart act as a good gauge of the trend. The yellow line is the linear regression, “best fit,” line. Basically, this line is drawn mathematically to best represent the slope of the trend. The blue lines form a standard channel. I first connected the lows to form the bottom, support trend line. Then, I drew a parallel line connecting the highs.

As history shows, each time bond prices hit the upper threshold they subsequently corrected lower, or moved sideways for some time. We’re at that point now. Bond prices are extending the rally, but are due for a pullback as they’ve stretched to the upper limit of the channel.

Nevertheless, the long-term trend of declining yield is still very much intact. Expect this to continue as long as investors are willing to pay for the safety of savings returned intact.

If you haven’t done so already read the Survive & Prosper issue on “How Safe Are Government Bonds Really?“.

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Adam O'Dell
Adam O'Dell has one purpose in mind: to find and bring to subscribers investment opportunities that return the maximum profit with the minimum risk. Adam has worked as a Prop Trader for a spot Forex firm. While there, he learned the fundamentals of trading in the world’s largest market. He excelled at trading the volatile currency markets by seeking out low-risk entry points for trades with high profit potential. An MBA graduate and Affiliate Member of the Market Technicians Association, Adam is a lifelong student of the markets. He is editor of our hugely successful trading service, Cycle 9 Alert.