The Chart Manager - John Gajewski

Earlier Bond Outlooks

Outlook: Bonds

Will channel support break to allow the bears to prevail?

October 30, 2005

Chart of outlook for bonds as at 20 Oct 2005

The recent drop to 94.525 has brought AUS 10yr bond futures to its base channel support. Will prices turn upwards and start a new rally? Or is it time for support to break?

The time cycles generated from the 2000 and 2002 lows have the AUS 10yrs on the downward side of the cycle, in a similar time position as February 2001 and April/May 2004. A drop through the adjusted support at 94.35 will confirm it and prices will then decline until the end of June 2006.

But I am attracted to the large "rising wedge" pattern that has emerged and calls for another aggressive rally through the 2003 high. The action of the past few months fits a small irregular consolidation which may have ended recently at 94.525. A subsequent rise through 95.030 is needed to confirm the bullish prospects.

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