T-Bond

The Smart Money -- i.e., the same clowns who hang on Yellen's every word and who make an obscene living throwing Other People's Money at financial garbage -- is saying it's time to throw some of your own hard-earned cash at inflation hedges. Specifically, Black Rock recently joined Pimco in pushing inflation-hedged bonds, and gold. This is like Time magazine picking the Colorado Rockies as the  team to beat in 2016. In other words, a bet you can fade with perfect confidence.  If you had any doubts about this, consider that the 'inflation' the institutional hacks foresee is based on tightening labor markets and firming oil prices. Seems these guys actually believe the U.S. economic recovery is for real. Whatever the case, investors have given Black Rock $4 trillion to play with, implying that the firm's bet on inflation may already be getting a tad crowded. We think it's a good time time to double down on deflation, which in case you hadn't noticed is about to swallow the economies of Europe and China.  In the meantime, as long as Black Rock, Pimco and their ilk remain steadfastly on the wrong side of the bet, there will be plenty of upside for us in long-term Treasurys and other deflation hedges. My long-term forecast for the 30-Year calls for 1.64% yields, versus a current 2.61%. If my target is reached, capital gains potential would be enormous.  Does the chart suggest that T-Bond prices are about to fall (see inset)?  Perhaps no one at Black Rock or Pimco can read a chart?  That would seem to be the case, given that they have been nothing but wrong wrong wrong on interest rates for years. Concerning gold, maybe they'll be right -- although not for reasons of inflation. Rather, with the global financial

It's taken two months for the futures to eat through the overhang created by the mid-October spike. It was prompted, as you may recall, by Japan's announcement that the BOJ would attempt what Max Keiser wryly dubbed 'QE9'. It's too early to predict how much more consolidation the March contract will need at the 145^04 midpoint pivot, but the so-far small breach of this resistance is a bullish sign. Assuming the rally unfolds as projected, eventually hitting 151^12, we can infer that long-term interest rates are headed beneath their 2012 lows. For now, you should position from the long side, preferably via camouflage, since the midpoint resistance has become theoretical support.  If you're uncertain about how to do this, just ask in the chat room. _______ UPDATE (5:10 p.m.): The futures pushed energetically past the 145^04 midpoint pivot, turning it into likely support. This suggests the move to 151^12 could unfold more quickly than I had initially imagined. The next promising rally target is 146^28, a Hidden Pivot resistance extrapolated from the following coordinates on the hourly chart: A=140^30 on 12/8; B=144^14 on 12/11; and C=143^11, also on 12/11.

The pattern shown looks bound for the 141^06 target, but it wouldn't be unusual for the futures to correct down to p=138^26 before they launch again.  This vehicle tends to move with precision to Hidden Pivot targets, but I'd still suggest the camouflage technique if you plan to get long on the pullback.  FYI (but not recommended): a 'mechanical' entry at p could employ a stop-loss as wide as 25 ticks, since there would be three times that or 75 ticks, of profit potential.

I've stated that the T-Bond rally has much further to go -- that the powerful run-up begun at the start of the year has been just a warm-up for the massive unwind out of stocks and into bonds that is yet to come. Even so, the rally has been so steep and relentless that that a nasty correction was long overdue. Is it already under way?  We'll be better able to judge when we've seen how the downtrend interacts with the 135^10 target shown, my minimum downside target for the near term. That implies that the rally from yesterday's lows can be shorted, presumably at a Hidden Pivot resistance discernible on the lesser charts, and that the anticipated drop thereafter could be bottom-fished at the 135^10 target itself.  Keep in mind that the futures could fall all the way to 132^00 before retracing half of the 2014 run-up, and to 131^30 to reach the 0.618 Fibonacci level. ______ UPDATE (11:41 p.m. ET): The wicked 'Draghi swoon' that greeted the day sent this vehicle plunging to a 135^13 low before it rebounded sharply.  Did you catch a piece of the action?  If so, please let me know in the chat room and I'll establish a tracking position. _______ UPDATE (June 10, 12:52 a.m.): The futures were in a moderate uptrend on the hourly chart at the closing bell. Now, if they push past a midpoint Hidden Pivot at 135^29, look for further progress -- presumably tradable -- to at least 136^26, basis the SEPTEMBER contract.

Some attributed the selloff in stocks and bonds yesterday afternoon to a weak Treasury auction. Despite this, the futures are bullishly impulsive on the weekly chart (see inset), and it wouldn't take much to set-up a camouflage buying opportunity.  Using the shortest A-B interval available, I've sketched out a hypothetical scenario that would lend itself to the task of getting aboard with relatively little risk. If and when a follow-through leg is generated, you should look for your entry spot by zooming down to the one-minute chart just before the buy signal is tripped on the 'weekly'. _______ UPDATE (May 15): Business-page headlines last week bore seemingly ominous news:  "Bond Prices Tumble on Weak Auction'.  My bullish forecast at the time went sharply against the grain, but it has since been borne out by the strong rally that followed.  Did you catch a ride?  Please let me know in the chat room and I'll establish a tracking position for your further guidance.

We don't pay much attention to this vehicle other than at key turning points, but the short-term pattern shown looks like a lay-up for traders who see futures contracts as no more than bouncing dots on a chart, waiting to be exploited. There are actually two trade possibilities here: 1) a 'camouflage' short as USM slips below the 132^13 midpoint; 2) and a very tightly stopped long from within a tick or two of the 131^17 target. Good luck!  Please report any fills in the chat room so that I can establish a tracking position for your further guidance. ______ UPDATE (3:17 p.m. ET): The short was tricky to initiate, but once aboard, your reward came quickly with a drop to a so-far low at  131^26. As noted above, the short should be covered and reversed near 131^17. ______ UPDATE (April 6, 3:57 p.m.): The low of Friday's violent price swings was 131^21 -- not quite close enough to have gotten you long easily. Although this could prove to be an important low for the short- to intermediate term, under the circumstances I'll assume no subscribers were filled. _______ UPDATE (April 11, 1:03 a.m.): Next important stop on the way higher: 135^17. _______ UPDATE (April 20, 11:10 p.m. ET): Last week's fleeting stab to 135^10 came within less than a quarter-point of my target -- close enough for us to consider it fulfilled. It took the futures more than a month to get there, so we should expect this correction-or-worse to last for at least a week or so before bulls attempt to push T-Bonds to new recovery highs.

The bonds have easily achieved every bullish benchmark that I've set here in the last month -- and then some -- but the recent stall three ticks shy of the 135^06 target shown was to be expected.  If the futures can get through it relatively quickly --  meaning within perhaps 3-4 days -- that would imply there is still considerable buying power remaining to be spent. On the weekly chart, it would take just a modest rally to push the futures past two 'external' peaks, creating a very powerful impulse leg that would have bullish implications for the intermediate to long-term. The higher of the two peaks lies at 136^00, less than a single point above the recent top. ______ UPDATE (February 10, 10:08 p.m. EST): The accumulation process, assuming that's what it is, is unfolding slowly, and the bonds are in fact in the throes of a bearish dance that could carry to as low as 131^30, or perhaps 131^12, before they find traction. _______ UPDATE (February 19, 11:06 p.m.): The March contract has put in a potentially important low at 132^00, two ticks from my target. If you got long down there please let me know in the chat room so that I can establish a tracking position. _______ UPDATE (February 24, 2:00 a.m.):  The low has held so far, but because no fills were reported, I have not established tracking for this vehicle. The futures are in screw-the-pooch mode at the moment, but not without some potential 'buying' set-ups not far away on the hourly chart. _______ UPDATE (February 28, 3:17 a.m.): The futures are munching through midpoint resistance at 134^16. Once through it, they should be presumed bound for a minimum 137^00, a Hidden Pivot target shown in the chart.

The news media appear to have gone 'all-in' hyping the supposed economic recovery.  It's one thing for editorial-room halfwits, eggheads, Guvvamint statisticians and Obama shills to pretend the economy is in fact strengthening. But what are we to make of the bond markets, which have been acting as though they too believe that a powerful recovery has finally taken root?  Judging from the long-term T-Bond chart (see inset), that's what has been happening.  Notice that the continuous futures contract recently generated a powerful down-leg, one that looks strong enough to keep on going. If so, yields are headed significantly higher, presumably because the economy is about to pick up speed. Wouldn't that kill the economically crucial housing recovery, you ask?  Indeed it would -- especially considering that mortgage re-fi business virtually dried up earlier this year in the wake of a relatively modest increase in rates. For us, at least, it's impossible to imagine a broad recovery with the housing sector hitting a wall. A new paradigm, perhaps? We've wondered ourselves whether, five years from now, the real economy -- the one tied to job creation, capital investment and income growth -- will still be a zombie even as the Dow pushes toward 40,000. As preposterous as it sounds, who can be sure? Returning to the technical picture, March T-Bond futures, which move inversely to yields, appear bound for at least 125^07, but to as low as 114^22 if the higher number, a Hidden Pivot support, gives way. If the lower number were to be reached, 30-year yields would be above 4.5%, compared with a current 3.9%, and long-term mortgages would be well north of 5%.  Not exactly a catalyst for real estate inflation. Alternatively, the most likely place for the March T-Bond to turn higher, assuming it is about

The futures have rallied robustly without having quite reached a 129^03 bear market target given here in July for the September contract. Moreover, the initial rally from the low has generated a bullish impulse leg on the hourly chart, suggesting it will prove to be more than a flash-in-the-pan. Notice that the appearance of a double top with a high at 130^30 made in early September has cloaked the strong impulsiveness of the thrust, creating an attractive camouflage opportunity with short-term upside potential to 131^25. _______ UPDATE (September 17): Yesterday's fleeting burst missed my rally target by half a point (13/32), suggesting T-Bonds could spend a week or two basing before they are able to launch a sustained rally. However, the outlook would improve significantly if buyers get second wind for a move exceeding the two labeled peaks.  Please note as well that a 'B-C' pullback from the small zone in-between them (see inset) could yield an exceptional opportunity for 'camouflage' traders to bull up on-the-cheap. _______ UPDATE (September 23): A pattern similar to the one I'd sketched earlier has unfolded, tripping a buy signal at 131^22. If you used my recommendation to get long, please let me know in the chat room. I'll establish tracking guidance if I hear from at least two subscribers who filled the order.  In any case, the first profit taking opportunity on the daily chart lies at p=132^13 (see inset, a new chart). _______ UPDATE (September 25, 3:40 p.m.): The futures have spiked today to within three ticks of the very bullish, 133^26 rally target I'd flagged a while back in the chart (see inset). That makes this vehicle a short, at least for the moment.  However, if the futures do not pause for at least a few days at such a crystal-clear target,