Today's chart is complicated at first glance, but I'll walk you through it step by step.  I'll also cover it in today's Huddle video for MBS Live members.  If you're not getting notifications when a new Huddle is available, you can enable them HERE.

Bonds have been consolidating for 5 straight days this week after a patently awful performance last week.  As we discussed last week. this was to-be-expected (or at least "hoped for") because we'd seen 3 straight weeks close at higher yields, and we essentially never see a 4th week when the bad string of weeks occurs amid a general uptrend (we have seen it as part of a bounce back from long-term lows).

Even if we don't end in positive territory this week (need to stay under 2.66+ in 10yr yields), it's unlikely we'll extend the selling trend in the same way the past 3 weeks have.  Unfortunately, my little prediction about this week not being as bad as the last 3 is only as good as this week!  It doesn't have much of an implication for the trading to come.  For that, we can turn to some other technicals and begin looking for a bigger-picture ceiling in rates.

Today's chart compares 3 time periods using 10yr candlesticks with short and long-term momentum indicators (short = blue/red, long=teal/green).  These indicators are pretty simple.  The closer they are to their upper boundary, the worse things are.  The caveat is that hitting those upper boundaries sets the stage for a reversal.  With that in mind, we've just recently hit the upper boundaries in both, so we can start talking about a reversal.

One thing that concerns me about comparing the current example to past examples is that we really haven't seen anything like it in terms of momentum in the past decade.  This uniqueness is marked by the yellow line drawn along the top set of Blue/Red momentum lines.  

Other than that, all 3 examples have some common elements.  There was a longer-term, low that preceded the negative momentum and momentum indicators both topped out during that sell-off.  From there, we move to assessing how the past 2 examples might translate to the present.  Both past sell-offs took about 6 months to fully unfold.  We're getting pretty close to that. 

The most important similarity between the past sell-offs is that momentum indicators both had to move to the bottom of their ranges before bonds were confirming a reversal.  In the case of the 2013 momentum shift, bonds were merely confirming that the last major ceiling was the last major ceiling.  

The bottom line is the same as it has been: we need to see a lot more strength before entertaining a reversal.  It could take weeks for such strength to show up.  And when it does, it may only be acting to reinforce the most recent major ceiling, as opposed to the inception of a new trend toward substantially lower rates.