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Market Insights / Commentary

Power-charting the selloff in bonds

By Michael Burke

There’s a growing consensus interest rates may be headed higher, which means bond prices may be headed lower.

The idea went mainstream a month ago when headlines swept the globe: “Japan to end quantitative easing!” “Fixed-income guru Bill Gross calls the end of a multidecade bull market!” “Europeans rethink easy money!”

Yesterday, the story was back in the news in a big way after January’s inflation report shot past expectations. It triggered another selloff for bonds, and sent 30-year Treasury futures (@US) to their lowest price since last March.

I’ve been watching the move with a custom candlestick indicator on TradeStation. It analyzes recent highs, lows and closing prices to suss out whether traders are buying or selling. Activity’s grown increasingly bearish since 2018 began:

30-year bond futures, weekly chart

This special analysis tool tends to flag multi-month flows of money into or out of a security. The clearest signals occur when the histogram at the bottom flips between red and green. Once it starts in a new direction, momentum has generally continued for at least a quarter.

Do you want to know how to create indicators like this? Check out our Master Class

The good news is that it’s a cinch for customers to make their own custom indicators like this using TradeStation’s Easy Language code. All the seats for our March Master Class have been sold out, but check back soon for our next session June 18-22.

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