If your a technician, you can’t help but notice the very long (month ish) consolidation occurring in the bond market.
Today’s price action appears to want and break the support that has been around since March 15th. As you can see above, we do some ‘basic’ projections and right when the neckline breaks there is minor support (blue projection arrows) and then the BIG support w/ the blue rectangle present. A lot of math coming into that level. I believe that is the crucial level.
As you can see from the weekly chart above, the “time” of the corrections have been pretty symmetrical so from a timing perspective certainly looks like this “bounce” has run it’s course for one more leg down.
From the ATH, it’s a pretty clear count and I’m labeling this as a 4 completing/completed and another leg down (rates go UP in this case) into the .618 from the 1981 low (40+ years ago) in bond prices. Note the blue measured move above .. that was the largest correction in 40+ years. We take harmonics from that and you can see the square root of 3 harmonic nailed the low precisely. We have a .618 retrace, 1.618 extension, trend line coming from the low in 1981 and a harmonic of the largest prior correction.
That level is a good level to BUY – if we get down there.
A case can be made for a 100+ year triangle is complete and inflation, while pulling back now, has begun a bull market? Yes, I know that sounds crazy .. but, either way, would hate to see a close above the that upper down sloping trend line …
well, underwater on TBT. I’ve shown my entry and man did that look like a NICE one .. but, it’s all probability. folks there was a TON of math coming together in /around 17-18 and it got wiped out. but, we have some support holding at the .707.
I’ll cut half my position on TBT if we lose 16.06 to the downside on a DAILY close below.
I’m still bullish RATES but … trade what you see, right? let’s give it a couple more days and then might need to throw half a towel into the ring on this one …
also, I’ve done the 30 year continuous futures contract INVERTED to show the same picture at TBT and to also see if there is some support that might be found on this one … hmmmmm. can’t win em’ all …
investing is like golf .. learn how to play out of the rough and the sand and you will be a good golfer! I’m still learning!
TBT has fallen into the bottom level of BUY zone and I’m long TBT in/around 18.
A lot going on w/ his chart but wanted to show you some “other” geometry that I was working … you see, we can make arcs and develop trend lines using the geometry of the chart but also, using the TIME and PRICE to define the vectors.
in this case, we take the all time low and draw the bottom of the square to intersect the “time” of the high. that will define our arcs and the square. the most important aspect of a square is the 45 degree angle (red line) and that line we then “copy” and “paste” to the bottom right of the first square and, well look at that … it intersects the LOW almost exactly. we also draw another square (and we can/will keep drawing these squares to find the trend lines running the show) and notice how the two 45 degree angles TIMED the low almost exactly .. (FWIW, this was a precise 1.618 AB =CD and a .618 retracement along w/ the same percentage corrective move that drove price into the all time low … came in around 21-22 percent decline.
so, while we do have the traditional “slap a retracement grid and look for the .618 retracement and a whole lot more …
take some time to study this chart .. try to understand it as it’s very helpful, indeed.
and, w/ all this work, I’ll consider it “wrong” if we get a daily close below 16.08 (.786 retracement)good weekend to everyone …
please see chart below … ultimately, it’s about risk control and how much risk one is willing to take.
our thesis is the 14-15 dollar low was a BIG low and we are very early in a multi-year (multi-decade (?)) rise in interest rates. yup, you just read that correctly …so to manage risk, one must understand that there is a potential that the trend has changed and we now have 3 different levels to enter …
here and now … GARTLEY 222 pattern complete at the low however, a nice gap down warns of lower prices. gaps into a level beg of caution …
19.14-19.42 …realistic w/ that gap down and lands basically on the top of the channel w/ polarity in play.
18-18.50 .. a lot of ratios and polarity principle (red line) … that looks good.
so, if the low today was the low but you don’t like the gap down then WAIT for a daily/weekly CLOSE above 21.50 for confirmation and BUY or if you do not think the low was today then WAIT for the two levels below.
either way, risk is basically in the 16-17 former cluster or the low at 14.28. that’s the true support zones. the lower breaks then the entire thesis is 100% wrong.
doing an update as we can see the well defined downtrend that has been in place since, pretty much, inception in 2008.
if you followed some of the other Bond work on the site then you would know our thesis is there is a MAJOR HIGH in bonds (TBT is the inverse) so, we could be, perhaps, looking at the very beginning of a BIG run in TBT.
yes, interest rates to rise and, potentially, rise VERY fast …. hang on.
perfect TIME and PRICE patterns were hit today and, IF (a really big if) the count is correct we are on the verge of a very powerful move in the bonds ….
the thesis was that we had a VERY VERY large top in March of this year at multiple waves of degree. the pattern that hit today was one of those text book sell PATTERNS and the price reacted. here we go?
here’s last weeks post on the Asian Open and the YEN. level worked pretty well and we rallied pretty much all week. the USD vs YEN should stay below the 108.46 level and/or 109.866. if (the big if) this sell signal works then it ‘should’ put pressure on the equities:
even w/ the FED cutting rates take note of the key (intraday sell signal) on the bonds … intraday/15 minute chart. we have higher targets but this is the ‘first’ sell signal from the lows back on 3/13.
here’s the potential mirror image foldback I’m monitoring on the NYSE Index. Pretty symmetrical pattern. note the key trend line … that’s a BIG DEAL.
yes, I know that even thinking of BUYING TBT in this current market is insane BUT I really don’t care … it’s a BUY pattern that works or doesn’t. i did a quick blog on interest rates last week and those targets were SMOKED by the end of the week action but take a look below and then figure out a gameplan.
please see below:
we have a lot going on here:
Fundamental Frequency: take a ‘major’ high and low or vice versa and divide them. you now have the ‘fundamental frequency’ to define the move … see the purple dashed lines? those are fundamental frequency targets
Square the High: if you take the square root of the all time high you get 17.31 which is basically where we closed
the market likes to go ‘down’ around 65% per swing
additionally, if look at the foldback point we have the two big blue arrow s equal in their measured moved
Volume – MOST VOLUME EVER. capitulation low? Hmmmm
So, let’s don’t be a hero but … let’s see if the low was in place on Friday OR the market goes down a little more (TBT) into the buy zone of 14-15 and then wait for the market to EXPLODE off these levels and then try to get in .. if the market does a dead cat bounce and well, just goes pfffffffff … then stay away.
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.