Stocks: bond yield as a Christmas gift

HToday is Christmas – and tomorrow and the day after tomorrow too. Finally. Not necessarily because the past twelve months have really asked a lot of us and a break will definitely do you good. But because I can still look forward to Christmas Eve for a whole year. I like it when everything gets quiet and slower, when you meet each other with more mindfulness, everyone tries to do something good for their loved ones, and especially to be able to sing “Silent Night, Holy Night” during Christmas mass.

Of course, gifts are also part of it. Why should it be any different? After all, the Christ Child is also a gift to us all. Why shouldn’t we pass this joy on? I definitely don’t want a standstill agreement that supposedly relieves everyone of the burden of having to give something. Gifts and Christmas Eve are inseparable.

That is why this post today, on Christmas Eve, revolves around a chart that can certainly be seen as a gift. For me he shows with rare clarity what he wants. We are talking about the yields on ten-year Bunds. The indications that these will take off in the not too distant future have become impressively good.

Elliot waves in sight

A key element of this forecast are the numbers in the chart. They represent the Elliott waves, which were already mentioned in more detail two weeks ago: A first, often quite dynamic rise (1) is followed by a phase that is often very extensive and lengthy corrective (2). At this time, most investors already feel that something new is in the air. However, you cannot yet observe this fundamental paradigm shift in the chart. This is one of the reasons why things go back and forth uncomfortably at this time, often driven by news, without one of the parties, bulls and bears, which are always conflicting in the markets, being able to take over command over the long term.

It is precisely during this time that an enormous amount of energy accumulates, which is just waiting to be discharged. That is why the opposite often happens, especially when everyone has adjusted to an eternal swing market and no one believes in any trend anymore: “Elliott 3” begins and the charts shoot up.

Image: Staud Research Bad Homburg / FAZ-Grafik Niebel

In my opinion, this is precisely the situation in which German ten-year bond yields find themselves: on balance, next to nothing has happened for a long time. It went up and down for a long time without a trend being discernible. In the meantime, the market participants have rearranged themselves, and the pieces have, in the words of André Kostolany and measured by the return chart, changed from shaky hands to strong hands. A visible sign of this development is the formation of a new upward trend. Because the strong hands smell the roast and grab it earlier and earlier, the chart no longer falls back to the previous low, but turns back earlier.

There is also a classic soil formation. It is described in textbooks as the inverse shoulder-head-shoulder formation (SCS): The first dive to minus 0.72 percent (shoulder) is followed by a new low at minus 0.88 percent (head) and after a recovery renewed recovery another setback (shoulder). Typically, the next step is to overcome the powerful resistance zone between minus 0.11 and minus 0.19 percent and then a rally to my target zone of plus 0.30 to plus 0.50 percent. Only in the event that, contrary to expectations, everything turns out differently: Below the upward trend, especially below minus 0.88 percent, other rules should apply.

So the present is probably under the tree. It just has to be unpacked. I sincerely wish you and your family a lot of joy with giving presents, a merry, blessed Christmas and today a Christmas Eve.

The author heads Staud Research GmbH in Bad Homburg.


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