It seems everyone and their dog is expecting a major breakout to the upside on yields, now I wouldn’t say it’s impossible as anything is possible, but generally whenever everyone is all geared up for one side of the trend, the other side can be a good bet if the conditions support that idea. In this case there is a potential bearish setup still possible on the 10 year yield (TNX).

If a strong reversal back below 3.050 is seen, then it could have the makings of a move lower and suggest the recent advance is that of a B wave of a flat pattern; however without any downside below 3.05 we don’t have any evidence to support a reversal and a move lower. If 10 year yields fail to breakout aggressively to the upside like the majority of traders think, then it can setup for a very nasty trap and argue for a decline back below 2.75 which would be a shock for most traders.

It’s time to watch yields, if they fail to rally like the majority think, then a strong reversal will likely see everyone bail on the “short bond trade”.