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?
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.
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.
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 ….