Here are updated hourly charts showing pit trading in the December t-bond and 10 year note futures. I have drawn my estimates of the boxes which are controlling the drop from the post Katrina high at 118-10 in the bonds and 112-20 in the notes. These boxes have not been working as well as they normally do during this drop so I am relying on them less when estimating support and resistance.
In any case I think the bonds are now headed for 110-00 and possibly to the low of the box near 109-16 or so. The notes I think are on the way to 107-00. There is heavy bearish sentiment in the bonds and notes as Mark Hulbert has noticed in this recent column. So I think this leg down to 110-00 and 107-00 is very likely to be the last one in the drop from the late August top. I would then expect a rally of about 4 1/2 points in the bonds and 2 1/2 points in the notes.
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