The ABC pattern shown holds the key to T-Bonds over the next four to six weeks. Although my long-term outlook is very bullish and calls for a fall in 30-year rates to as low as 1.64%, a potentially sharp correction could be imminent. If so, it would be signaled by a decisive downside penetration of the red line, a ‘midpoint Hidden Pivot’ support at 155^24. Notice that this support has twice contained selloffs since early October. The fact that each bounce came exactly at the pivot not only lends authority to the pattern, it also implies that a significant breach of 155^24 — meaning one that hits 155^00 or so — is likely to continue to at least 153^10, or even 150^28. That would correspond to an increase in long-term rates — currently around 2.93% — to, respectively, around 3.10% or 3.21%. _______ UPDATE (November 3, 8:41 p.m. ET): The bonds have looked like hell since August, and yesterday’s dive only added to a negative intermediate-term picture. Since the plunge exceeded 155^24 by more than a point, we should brace for more downside over the near term to at least 153^10, or possibly even 150^28, as noted above._______ UPDATE (November 16, 11:40 p.m.): The futures have been rallying for a week, but not with enough vigor to get out of trouble. For starters, that would take a push exceeding the 154^18 peak recorded November 6 on the way down. _______UPDATE (November 22, 11:52 p.m.): Bulls have exceeded the 154^18 peak flagged above by half a point, implying that the pullback since is a consolidation. A mechanical bid at 154^00, stop 153^17, already has been signaled for a ride to as high as 155^13, but I would instead suggest cutting down the implied entry risk of $333 with a ‘camouflage’ entry on a pullback to 154^00. _______UPDATE (November 29): The futures easily surpassed 155^13, implying that any pullback be regarded as a buying opportunity. To do so ‘mechanically’, use the pattern shown. A 155^03 bid tied to a 156^11 objective would require an initial stop-loss at 154^25._______ UPDATE (November 30, 8:12 p.m. EST): The futures traced out a pattern almost identical to the one I’d sketched, with an overnight low at 154^29 that missed the stop by four ticks, then a strong rally to 155^25. A subscriber reported doing the trade, but anyone still long will be shooting for 156^11 (basis December), as noted above. A stop-loss at break-even level or better is suggested, or an ‘impulsive’ stop if you know how to fashion one. I’ve replaced the old chart with a new one showing a 154^30 target, since the March contract is now the active trader.
