Divergence Between New Low in Bond Rates and Momentum

The 5-year treasury rate made a new low in 2010 but a positive divergence has setup between the new low and the momentum to the downside. What this means is even though a new low was made there is less downside momentum than there was when the previous low was made. This produces the divergence between the new low and the momentum. Divergences in momentum can sometimes lead to trend changes, and since there is a lot of talk of the bond bull market being over this could be an important technical indicator to watch. Another interesting thing to note is this appears to be the first major occurrence of a divergence between momentum and price that has occurred on this chart in 16 years.

Dollar Still Hovering at Critical 80 Level

The U.S. Dollar continues to consolidate right at the 80 level, which is roughly the midpoint of the trading range the dollar has established since bottoming in 2008. The trading range has narrowed with each successive rally and correction in the dollar, and appears to be forming into a symmetrical triangle pattern. The monthly MACD is at zero, which seems to be a good dividing line between bull and bear markets in the dollar.

Commodities and recently the bond market seem to be suggesting the dollar is more likely to breakdown into a renewed downtrend when this consolidation ends. Commodities as represented by the CCI Index are almost back to their former highs:

Copper is hitting new highs:

Oil is continuing to make new highs:

And the long bond has made a lower high that will have to be reclaimed in order for the uptrend in bonds to continue:

Cup and Handle Pattern in Oil

While oil and oil stocks are sitting at new highs for the year it appears they may have just completed bullish cup and handle continuation patterns. Oil has also formed a bull flag at the 88-90 level while oil stocks have moved higher the last few weeks.

The logical target of the completion of the cup and handle pattern would put oil stocks right in a resistance zone from 2008.