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00:00CAROLINE: FROM BLOOMBERG ' S WORLD HEADQUARTERS, I ' M CAROLINE HYDE. SCARLET: I ' M SCARLET FU. IT IS TIME FOR CHARTING FEATURES. TODAY ABIGAIL IS FOCUSING ON BONDS. ABIGAIL: INDEED. NOT ONLY DO WE HAVE AN AWARD-WINNING ANALYST HERE ON BONDS AND RATES, WE ALSO HAVE THE FIRST UPDATE -- UP DAY IN FOUR DAYS. TAKE A LOOK, THE RATES HAVE GONE BACK UP BY 12 BASIS POINTS. BONDS ARE GIVING BACK A COUPLE BASIS POINTS, BUT THE BIGGER QUESTION, WE ARE SORT OF CLOSE TO 2%. ARE WE ABOUT TO SEE BONDS SELLOFF AFTER THE MAJOR RALLY? I WANT TO PRESENT ONE OF THE CHARTS PAUL PRESENTED FOR US IN SMART CHARTS RECENTLY. HERE IS THE BIG RALLY IN BONDS THIS YEAR, HE WAS RIGHT ALL THE WAY WITH YIELDS FALLING AND GOING FROM 3% CLOSE TO 1.5%, BELOW ACTUALLY. NOW WE HAVE A BOTTOMING PATTERN. LAST WEEK, HE SAID AS LONG AS THE DOWNTREND, IN OTHER WORDS THE UPTREND FOR BONDS, DOWNTREND FOR YIELDS, AS LONG AS THAT IS IN PLACE KEEP BUYING. BUT IF IT IS PIERCED, YOU MAY WANT TO RESPECT IT. MAYBE HIS VIEW WOULD CHANGE. IT MOVED A LITTLE BIT YESTERDAY ON THE THREE-DAY RALLY FOR RATES, NOT FOR BONDS, BUT TODAY IT IS RESPECTING IT.TO TALK ABOUT WHAT COULD BE NEXT, WE WILL BRING IN THE MAN HIMSELF. THANK YOU FOR JOINING US. THAT DOWNTREND IS HOLDING PUTTING MUCH LIKE A GLOVE, BUT IT APPEARS AS THOUGH MAYBE THE SELLERS OF BONDS WILL TRY TO PIERCE THROUGH IT AND MAYBE GO BACK UP TO 2%, WHAT DO YOU THINK? PAUL: I THINK IT WILL BE A PLACE WHERE WE CAN PLAY THE SHORT SIDE AND ALONGSIDE. WE WILL BE PERSISTENT. THAT IS WHERE YOU CAN REALLY SHINE. THAT PICTURE YOU SHOWED, IT WAS EASY TO SAY KEEP BUYING. NOW WE HAVE THE TRIANGLE STRUCTURE THAT HAS FORMED AND THE NOTCH ABOUT THE 1.85% LEVEL, I THINK THAT IS THE SIGNAL FOR THE TECHNICAL TRADERS TO START TRADING THE MARKET MORE. ABIGAIL: TAKE A LOOK, THIS IS THE FIVE-YEAR TREASURY. THIS IS THE INVERSE ON NOTE FUTURES. PAUL: BOND PRICES HAVE BEEN RISING, BOND YIELDS HAVE BEEN FALLING. THAT SAME TRENDLINE, DEPICTED ON THE FIVE-YEAR YIELD CHART, IS NOW BROKEN BASED ON THE SELLOFF IN THE BOND MARKET OVER THE LAST FEW DAYS AND THE RISING YIELDS. THAT BREAK OF THE TRENDLINE IS ONE OF THE NEXT PIECES OF TECHNICAL EVIDENCE THAT SUGGESTS THE FIVE-YEAR TREASURIES MIGHT BE DOUBLE TOPPING. AND THE YIELDS MIGHT BE BOTTOMING. ABIGAIL: YOU ARE RECOMMENDED, BASED ON THAT HEADLINE -- BASED ON THAT TRENDLINE BREAKING, AND THE PATTERN THERE, SHORTING. PAUL: WE ARE SHORT. WE HAVE REVISED DOWN TO 1.19-10. I THINK WE CAN GET TO THE 200 DAY MOVING AVERAGE. IF NOT, MAYBE THE 116 FIGURE. THAT IS A SIZABLE SELLOFF IN THE BOND MARKET, WHICH WOULD MAKE 10 YEAR YIELDS GO NORTH OF 10% -- 2%. PROBABLY 2.3%. ABIGAIL: THAT WOULD BE A SIGNIFICANT MOVE. A TACTICAL SHORT AT THIS POINT WITHIN A LONGER-TERM UP TREND FOR BONDS. MAYBE IF IT PIERCES THE 200 DAY MOVING AVERAGE, WE WILL HAVE A DIFFERENT CONVERSATION. BUT YOU ARE ALSO LOOKING AT POSITIONING. TALK TO US ABOUT THIS. PAUL: TALK ABOUT WHAT HAPPENED THIS YEAR, WE WENT FROM A VERY SHORT BOND MARKET AT THE END OF 2018 TO A RELATIVELY LONG BOND MARKET THIS SUMMER. IN FACT, THE NET POSITIONING ADJUSTED FOR OPEN INTEREST IS ABOUT A FOUR YEAR HIGH. SO WE ARE ON THE LONG-TERM SCALE AND THIS MEASURE SAYS POSITIONING IS NEUTRAL OR FLAT AT ZERO. THE BOND MARKET WENT FROM SO SHORT TO SO LONG IN SUCH A SHORT AMOUNT OF TIME, EVEN IF WE GIVE UP A QUARTER OF THAT POSITIONING YIELDS WILL BE HIGHER, HIGHER THAN THEY ARE NOW. ABIGAIL: GOOD POINT. BUYERS ARE GETTING TIRED.

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Five-Year Treasury Yields May Be in Double Bottom Trend, BofA Merrill's Ciana Says

In this edition of "Charting Futures," Paul Ciana, technical analyst at Bank of America Merrill Lynch, examines the rally in U.S. bonds with Bloomberg's Abigail Doolittle on the November 6 episode of "Bloomberg Markets: The Close." (Source: Bloomberg)

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