Wednesday, October 8, 2014

I've suggested buying out-of-the-money calendar spreads in TLT on weakness, but there have been few opportunities to do so because T-Bonds have been in a very steep, nearly relentless run-up since mid-September (see inset). We may get our chance soon, though, since, as you can see, T-Bond futures are very close to a clear Hidden Pivot rally target at 140^30 that has been nine weeks in coming. If the futures were to correct here, the implication is that they would build thrust for yet another leg up to 142^28, a Hidden Pivot target derived from A=133^01 (July 3). ______ UPDATE (October 9, 12:29 a.m. EDT):  The futures have pulled back slightly after making an intraday high at 140^29, a single tick from the target given above. We'll look to adjust our position in TLT if the correction continues for a couple of days. Another possibility that must be considered is that we are witnessing a monster rally a-borning. Although we've never doubted that the bull market in Treasuries was capable of achieving much higher highs, we had always assumed this would be catalyzed by a global panic into the ostensible safety of U.S. paper.  Although it seems unlikely that the meltdown we've dreaded and predicted for so long is actually under way, perhaps this is only because we are psychologically unprepared for it. Why so? Mainly, because it implies that our way of life, economically speaking, is conceivably about to change more drastically than most of us would care to imagine. _______ UPDATE (October 14, 8:25 a.m. Eastern): The futures have just reached, and slightly overshot, the target identified above. This hints of enormous buying power still percolating beneath the surface, since the Hidden Pivot exceeded is about as clear as they come on the daily chart. I've been eager

Join me on Wednesday at 1:30 p.m. EDT for an online workshop that will detail strategies you can use to bet on the bull market in Treasury debt. This has been an easy winner, even if we underestimated the ferocity of the rally. My gut feeling is that the bull is just warming up and that interest rates will test 2012's lows before the trend matures. If this were to occur within the next 12 months, capital gains for those who are long, for one, long-term strips could approach 35%. During Wednesday' session, I will explain how to adjust calendar-positions when the strike-price target has been exceeded. I will also show you how to add vertical bull spreads to the mix in order to extract more leverage from the rally if it should steepen. To access this session, visit the chat room at 1:15 p.m. for the URL and entry code.

The 1911.00 target shown is analogous to the one proffered today for the Dow Industrials, but if it gives way easily expect the selling to continue to at least 1896.75 without respite. Either target can be bottom-fished aggressively if you've been short on the approach, but don't pass up a chance to take a partial profit on a bounce of as little as 3-4 points.

Traders picked yesterday to start worrying about the sickly pace of global "growth," according to news stories that purported to explain the Dow's 273-point decline. It's about time someone started worrying. In plain fact, the slowdown began more than five years ago, when the U.S. economy supposedly was emerging from The Great Recession. Now, though, the slowdown seems to be picking up steam -- kind of like a locomotive running off the rails in reverse.  Industrial output in Germany has become particularly worrisome, down 4% in August to mark the steepest drop in more than five years. That's shocking news for anyone who hasn't been paying attention to the European Union's slow-motion crack-up. Evidently, investors have been too busy buying Spanish bonds hand-over-fist to notice. So where to next for the Indoos? There's a Hidden Pivot support at 16628 where we should look for a tradable bounce (see inset), although I would counsel you with an old trading adage:  When you try to catch a falling piano, wait till it has bounced a few times first.  If the support gives way easily you can put aside Hidden Pivot dynamics and simply look for the Dow to grope its way down to the August 7 low at 16334 in search of traction.