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

gameplan for the long bond structure …

CLIFF NOTES: if you look at the chart below, you will see an inverse head and shoulders pattern that had it’s genesis almost a year go – 07/2013.  Just recently (the past 3 trading days) we have broken from this neckline ….price on the bonds should start up.  Here’s the gameplan — expect the 137 28 level to hold as resistance.  (It’s a butterfly sell pattern) and then price should come down to the neckline and here is where we really see the battle between the bulls and bears.  All things being equal, the standard gameplan is to trade the return to the neckline and therefore go LONG in/around the 134-135 level.  However, if the rates are really going to rise, then this neckline will be defeated and  we’ll go thru the black line to the downside.  This is the gameplan …

 

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Thelma and Louis and Fixed Income

Interest Rates are approaching the CLIFF

Thelma and Louis made this choice ...
Thelma and Louis made this choice …

here’s a post that can allow you to catch up the saga w/in the fixed income market … whats funny is we have been SPOT ON w/ the dollar, commodities and fixed income.  the equities have just kept going UP UP UP.  Note, the BULLISH optimism in the equity market is HIGHER than 1987.  The thump is coming to the equity ecosystem.  The PATTERNS are showing it …back to fixed income –

http://bartscharts.com/2013/11/10/fixed-income-the-one-more-high-or-final-high-in-place-quick-looks/

going back 1.5 years here was one of the charts from fixed income market AT THE TOP:

long bond at the top
long bond at the top

here is the updated chart and, note, the cliff that the LONG BOND is sitting on …

Long Bond updated 1/4/2014
Long Bond updated 1/4/2014

we are sitting right on the cliff that has held rates at bay … I’ve used the “Pitchfork” method to help define the trend line using the “major” impulse low that started this run in 1981.  the red line is a simple 1.27 expansion of the construction of the Pitchfork.  It CREATED the trend line … remember 1.27 is the square root of 1.618.  Also, note the blue arrow is the LARGEST measured move correction since the 1981 origin.  IF/WHEN we lose this CLIFF prices should fall to the level shown …

below is a DAILY chart showing a POSSIBLE count.  Note, looks like we are finishing up a 3rd w/ perhaps that break into the target shown.  Here’s what we need to really pay attention to … in the past, when this trend line was hit PRICE exploded.  We are, at a minimum, respecting this support but price action doesn’t appear to be very bullish in/around here.  Just take note … again, a break here will target the 123 level.

long bond daily count
long bond daily count

 

2014 is going to be one heck of a fun journey …

rock on, ok?

BART

 

 

Fixed Income – TIME is right but what about the price and the underlying trend?

to catch up on prior fixed income posts:

http://bartscharts.com/2013/10/30/its-fed-time-and-an-explanation-of-the-recent-price-action-in-fixed-income/

http://bartscharts.com/2013/10/21/plotting-the-next-move-in-fixed-income/

November 5 2013 30 year bond

keep an eye on fixed income.  the two triangles shown at the bottom of the chart represent the PRICE and TIME extremes that have occurred w/in the context of the top in Bonds last year.  Note, the current rally has not exceeded either one in PRICE but we are definitely in the time window of a move down to start.  IMHO it’s too soon to call a BEAR market in fixed income as we have just completed a “normal” measured move correction w/ in the context of a 30 year bull run.  HOWEVER, we will see early signs appear to give a heads up …right now, w/ this time component being present it will be very informative to watch price action as continued strength above the blue horizontal lines during this TIME frame will cause prices to surge UP thereby suppressing YIELD once again.

TBT another move higher?
TBT another move higher?