USH13

Even though T-bonds are the most heavily manipulated vehicle we track, they've shown in the past that they are not oblivious to Hidden Pivot dynamics. Thus, the 146^11 rally target shown in the accompanying chart could prove useful in determining the extent to which true market forces, such as they are, are abetting loose monetary policy. In the past, dips to important correction targets have invariably triggered strong interventions. To look at it another way, we can infer that whenever long-term rates reach a threshold where investors might start getting skittish, the Fed can be expected to step in forcefully. Rallies, on the other hand, pose no such challenge, since they mainly allow the Fed to determine how much breathing room it's got. In the present context, this means that an easy move above 146^11 would imply that conditions remain psychologically favorable for yet more, effortless easing.  More bullish still for monetary psychology would be an uncorrected extension of the rally past the 147^08 'external' peak recorded on the last day of 2012. Were that to occur, it would tend to corroborate bulls' argument that stocks are headed significantly higher. One final note:  There is a hidden resistance at 145^27 (A=140^24 on /14; B=143^31 on 3/19) that for simplicity's sake I did not include in the chart. An easy move through it would presage not only an effortless leap to 146^11, but, presumably, an assault on 147^08 straightaway. _______ UPDATE (10:47 p.m. EDT): Today's surge pushed the futures past our target by 11 ticks, implying that they are likely to get past January's 147^08 peak without a struggle. This would refresh the bullish energy of the weekly chart, with potential consequences that I have noted above.

Numerous rally attempts failed to clear the midpoint pivot of the bearish pattern shown, and so the futures are now a strong bet to complete their descent to its 'D' sibling, 141^09.  This is an important number, since any slippage below it would look quite menacing on the weekly chart. Camouflageurs should look to get long on the 5-minute chart or less, preparing to pounce if and when the futures hit 141^13 on the way down. ______  UPDATE (February 18 at 10:50 p.m. EST): The futures have rallied moderately from one point above our target, providing what looks to be a temporary respite in the downtrend that has prevailed since summer. With extremely tedious range-trading since late January, however, the bonds look like they are in no hurry to upset anyone.

In today's commentary concerning the bonds, to keep things simple I did not explain the concept of the impulse leg, nor the distinction between internal and external lows. Suffice it to say, an uncorrected fall to the 141^09 target shown would exceed one of each, generating quite a bit of downforce on the daily chart.  You can see this for yourself in the downsized version of the chart, reproduced here for the edification of subscribers. 

With much effort, the futures have ratcheted higher since bottoming four days ago a single tick above a 143^16 Hidden Pivot target that had been noted here earlier.  T-Bonds are by no means out of the woods, and we cannot rely on the daily chart to tell us when this has changed, since it would take a monster rally to create a bullish impulse leg. Under the circumstances, we'll have to lower the bar, stipulating that an impulsive thrust on the hourly chart would at least put bulls back in the game. As shown in the accompanying chart, it would take an uncorrected rally exceeding the two labeled peaks.  Otherwise, a relapse would likely find support and a tradable bounce from the p midpoint shown. _______ UPDATE (9:35 p.m. EST): The futures flirted with danger, dipping below the 144^16 pivot noted above, and another at 144^14 that we pondered during yesterday's online tutorial session.  It's do or die here! _______ UPDATE (January 14 at 1:10 a.m. EST): An impulsive bounce from 144^11 has brought respite, if not to say a reprieve. The current rally pattern targets 146^13, with possible midpoint interference at 145^25.  _____ UPDATE (January 15 at 11:16 p.m. EST):  The futures rallied sharply yesterday to a high at 144^15, exceeding my forecast by a single tick.  The 18-tick pullback that ensued is bearishly impulsive on the 30-minute chart (a new one; see inset), but the short-term picture would revert to bullish if sellers have trouble pushing below the p midpoint of the pattern shown.

Someone declared in the forum that the long bond was tanking, but "correcting" is more accurate from a Hidden Pivot perspective. On the daily chart, based on the clear and compelling pattern shown, the March contract could come down to 143^16 without evincing even a whiff of bearishness. That would merely extend the tiresome series of ups and downs -- an apparent consolidation -- that has been dragging on since last summer.  Notice that a larger pattern shown in an inset allows a corrective move all the way down to 141^19.  As a practical matter, we’d need to watch things closely at that point, since any downtrend that exceeds an obscure and seemingly unimportant May 10 low at 142^18 would be bearishly impulsive on the daily chart.  Click here to sample Rick’s Picks free for a week, including daily trading ‘touts’ and access to a market-savvy chat room that goes round-the-clock.

My outlook for T-Bonds has been bullish for quite a while and remains so down to 2%, but we should nonetheless take note of some bearish impulse legs that have developed recently on the daily chart (see inset).  So far, they amount to a mere duel with a more powerful, bullish impulse leg begun from 144^24 in late October. We'll have a better idea of bears' earnestness when we see how they interact with the 145^00 downside target of the small pattern shown. A breach of that hidden support by more the 3-4 ticks would hint of more weakness to come, while a breach of the 144^24 low would sent up a warning flare.