Interest Rates … the trend is your friend, till it ends

the trend is your friend till it ends …

I really like an email I get once a week from the Visual Capitalist https://www.visualcapitalist.com/ as they visualize some of the most interesting subjects and break these subjects down for the common man (me) to understand.

I’ve been ruminating (my newest word) on the state of bonds, negative yields, sovereign debt and the like and, it just so happens that the Visual Capitalist did an expose on Interest Rates!

I also follow Martin Armstrong of Armstrong Economics and he posted this graph which shows interest rates are at 5000 year lows. so, per the title of this post, we have a 5000 year trend working w/ regard to the ‘trend’ of interest rates. folks, work w/ me, but that’s a trend!

Visual Capitalist has some great graphics, but they only go back 700 years. Still, that’s a pretty big trend, isn’t it?

Here’s Bond Yields since the 1300’s … another trend that is pretty strong, no?

So, just to paint the picture a little more, here’s a global look at outstanding debt. Folks, it stands at a mere 69 Trillion and counting …for comparison sake, 2 decades ago it was “only” 20 Trillion. Right now, IMF estimates, the debt to GDP ratio is 82%. The highest in human history ….

But, the band plays on … right? All time highs in the stock market, a REPO crisis that NOBODY is talking about, Trillions of derivatives out there that nobody can account for (watch $DB please) and the Euro Zone is a mess. Can one imagine what an uptick of just a 1/2 percent in rates does do the payments/load on 70 Trillion?

Not trying to spread doom and gloom as 1/ nobody would believe it and 2/ the world is drunk on buying equities and 3/ it’s just not worth the hassles.

Folks, it is NOT all good.

So what do we do … well, I’ve told multiple people that BUYING rates will go down as one of the greatest investments of our lifetime. But, do I really want to step in front of a 5000 year trend of lower and lower interest rates? Hell no! And, just because we have a trend that has been rolling since before common era (BCE) there will be a day that the trend stops. Maybe it will be in our lifetime.

Additionally, you can make money intraday, daily, weekly or even monthly buy going long rates. in the past, those are simply counter trend bounces of a 1000+ year trend.

Here’s TLT – 149 to 154 looks like STIFF resistance ….

here’s a monthly of short term interest rates, sitting right on a .382 retracement. IF a STRONG MOVE HIGHER THEN .382 should/could hold it

here’s the 10 year rates chart going back to the 1960’s … only thing I want to note is 1/ it’s been STRAIGHT down w/ intermittent ‘bounces’ but 2/ of late, notice we have pretty much – technically – been forming a key support CLIFF (and it is that ) around 1.5% and it’s been trying to base for around 8 years. nothing from a time perspective compared to 5000 years BUT maybe something for us to watch, closely, for a 40 year wave of lower interest rates?

30 year long bond: not approaching new highs and withing striking distance of a nice “long rates” target zone … hmmmm?

one last … Fed Fund Futures. sitting at .382 … what’s the market trying to say about the FED’s next move? Or what are they telling the FED to do because the FED is trapped ….

so, stay tuned and really pay attention to the fixed income market – globally – and the flow of funds.

I’m flat interest rates right now and, honestly, trying to wait (operative word) for a PATTERN to signal to give it a shot (long rates) I have the same ‘feeling’ I did when the USD vs JPY was down around 75-76. I tried (again the operative word) to go LONG the USD at 76 ish and was stopped out 5 times in a row (don’t judge – it is what it is) and found my P&L go to -18% and my first digestion of investor/trader cryptonite – the draw down.

I like the ‘feel’ I have but don’t like the result from last time w/ the JPY so I’ll continue to be patient. but just wanted to share and be real and honest … while it looks like trading/investing isn’t hard (it isn’t) it’s just not easy.

Bart

TBT

09/12/2019 – as discussed below, took my lumps on trying to go long TBT. so am watching it to try another LONG (yes LONG) TBT. note the volume spike and also the 52 ish percent moves down seem to cause bottoms. also, take a look at the 30 year continuous chart … we very well could have a BIG LOW in rates. crazy, I know …

well, got stopped out trying a long TBT a couple weeks ago … the entire world is/was cutting rates and that didn’t work out too well for the home team.

but, you know what, the PATTERNS are suggesting rates are or have bottomed (I know, call me crazy) but w/ (the latest numbers) 13 trillion of bonds out there paying negative yields something will/has to give ..

back to the chart .. note pretty much every decline has been roughly 52% except for one which was 66% (52.45*1.27) and we tagged the polarity of the long term LOG trend line … nice little volume capitulation …hmmm.

also, note the foldback point … if it’s the foldback point then we are at the very beginning of, dare I type this, a big move UP in TBT.

I’m going to be in the prove it to me world and look for 5 waves up on a weekly basis before jumping in again BUT am watching this one closely.

cheers and salute – Bart

Quick update – FED FUNDS INTEREST RATE FUTURES – FF

05/22/2017 –  take note of the ‘potential’ for the polarity principle to take place.  in this case, where there is resistance there ‘should be’ support.

***note: the gap down below the former resistance w/ this months action. something to watch … a gap down and move lower signifies higher interest rates.  monitor closely.

have a good night.

B

@seeitmarket w/ TLT and a quick look at the 30 year …

9/3/2016 – have been doing some work over @seeitmarket w/ Andy and the gang here: http://www.seeitmarket.com/defensive-sector-etfs-hit-targets-reversals-next-tlt-xlu-16014/

also, note the breakdown on Friday of the 30 year support .. this is looking very heavy.

here’s an update to the charts:

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Fixed Income …at the inflection point

CLIFF NOTES: target hit on the long bond, last target hit on TBT, RYJUX hitting some key support.  No doubt the move up from the neckline and multi month consolidation is a big deal and now we’ll see if the neckline is attacked as we are suggesting. Note, it already came down and bounced off the neckline for a very nice LONG Bond opportunity.  W/ this many patterns completing there is, of course 1 of 2 things that are going to occur … THEY WORK or DO NOT WORK.

CLIFF NOTES 2: we showed this chart before but note the FRACTAL that was present in the LONG BOND is EXACTLY the same as 10/1987. Not making any crazy crash forecasts just bringing it up that the PATTERN was EXACT.

Watch these levels very very closely ….

Main20140516085418 Main20140516085803 Main20140516085846 Main20140516090616 Main20140516090900 Main20140516091113

Plotting the next move in fixed income …

fixed income has bounced rather nicely and now the big question is “are we going to go to new highs?”

1.5 years ago, as fixed income flirted w/ the all time highs for 5 months we correctly saw multiple correlations that put the sell pattern present in context …

http://allstarcharts.com/are-interest-rates-at-a-key-inflection-point/

from there, the bonds fell pretty hard into the lows that were hit a couple months ago:

http://bartscharts.com/2013/08/20/fixed-income-revisited/

this happened BEFORE the infamous FED meeting last month and I held my stance that the Buy Bonds (Sell Yield) was the side of the trade to be on:

http://bartscharts.com/2013/09/18/bruce-buffer-of-ufc-and-the-fed/

now, the question is will the bonds seek new highs suppressing yield to a great degree?  there is a count that favors this action, but honestly, I don’t know ..just have to realize that the correction that has occurred in fixed income is almost precisely in line w/ the “normal” corrections that have occurred in the context of this 30 year BULL market. things are truly about to get very very interesting ….

30 year continuous contract found major support ... a dead cat bounce or another move  to higher prices .. .stay tuned
30 year continuous contract found major support … a dead cat bounce or another move to higher prices .. .stay tuned