10-Year Treasury yields at new 50-year low

By Colin Twiggs
August 22nd, 2011 6:30 p.m. ET (8:30 p.m. AET)

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10-Year Treasury yields at new 50-year low

10-Year Treasury yields are testing support at 2.00 percent — a 50-year low. One thing is clear: Fed monetary policy has failed. Suppressing short-term interest rates has, in most cases, lifted the economy out of recession, but also set us up for an even bigger crash the next time round — requiring even more severe interest rate cuts. Long-term yields have been falling for 30 years. We are now clipping the tree tops — with short-term rates near zero and no gas in the tank to lift us over the next obstacle. A bond market revolt cannot be far off.

10-Year Treasury Yield

European crash

Germany's DAX Index is testing support at its 2010 low of 5400. 13-Week Twiggs Money Flow below zero warns of further selling pressure. Failure of support would offer a target of 4500*.

German DAX Index

* Target calculation: 5500 - ( 6500 - 5500 ) = 4500

France has fallen well past its 2010 low, testing support at 3000. 13-Week Twiggs Money Flow again warns of selling pressure. Breach of 3000 would test the 2009 low of 2500.

France CAC-40 Index

* Target calculation: 3000 - ( 3700 - 3000 ) = 2300

Secondary markets are as badly affected. The Amsterdam AEX Index fell below its 2010 low, while 13-week Twiggs Money Flow below zero warns of selling pressure.

Amsterdam AEX Index

* Target calculation: 300 - ( 340 - 300 ) = 260

Nasdaq breaks support

The Nasdaq 100 broke support at 2050, warning of a down-swing to 1900*. Follow-through below last week's low of 2040 would confirm. The latest peak on 21-day Twiggs Money Flow, barely breaking the zero line, indicates strong medium-term selling pressure.

NASDAQ 100 Index

* Target calculation: 2050 - ( 2200 - 2050 ) = 1900

The Dow is headed for a similar test: follow-through below 10600 would confirm a down-swing to 9600*. Higher volumes indicate the presence of buyers and failure of support would prove seller's dominance.

China commits to down-trend

The Dow Jones Shanghai Index reversed below primary support at 328, confirming the primary down-trend signal from the Shanghai Composite Index. The 21-day Momentum peak barely above zero strengthens the bear signal.

DJ Shanghai Index

* Target calculation: 330 - ( 360 - 330 ) = 300

A market does not culminate in one grand blaze of glory. Neither does it end with a sudden reversal of form. A market can and often does cease to be a bull market long before prices generally begin to break..... one after another those stocks which had been leaders of the market reacted several points from the top and — for the first time in many months — did not come back. Their race was evidently run...

~ Jesse Livermore in Reminiscences of a Stock Operator by Edwin Lefevre.