So back to the title of this post, 30-year yields are now at the point of no return. After bottoming in late 2008, yields rallied all the way back to the declining line of resistance which has been in place since at least 1995. After kissing the line multiple times in 2009, 2010, and 2011 (noted by the green arrows), yields began to fall away once again until actually dropping to new multi-decade lows in 2012. A half-hearted rally ensued, but yields were unable to even make it back to that trend line before falling to its current level of 2.759%. So what happens from here?
From a technical perspective, the chart appears to be carving out a decent looking long-term inverse head-and-shoulders pattern which I've marked on the chart. This is a bullish pattern and tends to represent the end of a bear market and the beginning of a bull market. While the pattern looks fairly defined (its neckline is severely sloping which makes the pattern slightly less "textbook"), it's not all the way completed yet. That right shoulder is still being formed and is by no means complete - hence "the point of no return."
If yields reverse higher and the right shoulder does indeed pan out, then a break above 40 on the chart (4.0% yield) will likely signal a new bull market in bond yields (ie. investors are selling treasuries and bond prices are falling). If, however, yields continue to deteriorate and fall below the 2012 lows, then look out below. This would be a very bad signal for the overall economy. Remember, yields would then be lower than at the depths of the financial crisis when the S&P 500 was in the 600s!
As I've been saying for months, there are too many divergences between stocks and bonds for things to continue on the same path for much longer. Something has to give - will equities finally start falling or will bond yields start rising?