The unconventional pattern shown implies that TNX would be a short if it rises to 4.42%. This means interest rates on the 10-Year Note could be at or near a cyclical top at that level. If we treat the graph as we would any other, a fist-pump through c=4.59% would imply that rates are about to rise sharply. But if the 'mechanical' aspect of the trade works the way it's supposed to, rates could be on their way down to as low as 3.90% if they reverse at 4.42%.
[We are coming up on a month since I blew 'Taps' for a bear market that supposedly was just starting. There was panic in the air that Sunday because America's enemies in Brussels were dumping T-Bonds in an attempt to crash the market. They were intent on forcing Powell to ease, but their plan failed when he stood firm. The S&Ps dove several hundred points, but instead of continuing into the abyss, they turned from within a hair of a major target at 4820 that I'd billboarded in Rick's Picks. From this, I inferred that the bear market had seen its worst and that there would be no recession, nor any lasting, destructive effects from the tariff war. This prediction seemed outrageous at the time, and perhaps even moreso now, since Canada, America's biggest trading partner, has just elected a leftist who wants to go to war with the U.S. rather than kowtow to Trump's demands. I wish them good luck - and China, too - since curtailing business with the U.S. will send their respective economies into a death spiral. Europe's economy is already dying, and they, too, will eventually have to come around. If the U.S. doesn't sink into recession itself, Trump stands to win it all. The recession would not be due to supposedly falling GDP, which, in the context of reduced government spending is a meaningless heap of statistical manure, but because bear markets happen, and U.S. stocks may already be in the grip of one. That is notwithstanding what I've written below - my commentary from several weeks ago, when stocks failed to crash. I will run it every week until the S&Ps prove my thesis wrong by relapsing decisively below 4820. If and when that happens, it will be time for Katie to bar
June Crude has tripped a moderately appealing 'mechanical' buy signal, but we'll use it to get our bearings rather than try for a quick score. Pullbacks to the green line from the secondary Hidden Pivot (p2=63.66) are riskier to buy 'mechanically', at least for a move back to the target, but the set-up is often good for a one-level ride, in this case from 57.67 to 60.66. It's too late to jump aboard, since the futures are already trading above x=57.67. Still, I'll suggest observing what happens next to familiarize yourselves with the trade and the opportunity big retracements can create..04
As last week began, rates on the Ten-Year Note looked ready to jump to 4.58% from an already uncomfortable 4.40%. Instead, they eased sufficiently to suggest the trend will continue down to 4.09%, the 'd' target shown in the chart. That might be the most we can hope for, but if the weakness penetrates the 'hidden' support at that level, it could portend more slippage to 4.07%, or even 3.90%. These are somewhat different from the potential lows we were tracking earlier, but the graph looks equally capable of giving us an accurate read over the next 3-5 weeks.
The pattern shown, with a big-picture rally target at 35.445, has kept us in close harmony with the trend, but it never promised much satisfaction. Pullbacks haven't been sufficiently robust to trigger any 'mechanical' buys, and a short from d is unappealing because the target coincides with some prior peaks that are certain to attract a crowd. That doesn't mean the pattern is untradable, but it takes work. Mainly, it's a matter of hunkering down on the lesser charts to derive entry triggers from them. The daily chart yielded up a fat-looking one at 32.565, but the turn from 15 cents above it suggests it may have had a fan club.
The Dollar Index triggered a 'mechanical' short when it rallied to the green line as the week began. The signal would rate a 6.0 out of 10, since the low that preceded the rally was distant from our sweet spot, even if it did touch the red line. I am leaning bearish, but if DXY blows past C=100.28 toward the beginning of the week, we should give the move the attention it deserves. The greenback is long overdue for a rally, and there's nothing to say it can't start here. Worst case for the near term is 95.79, the 'D' target of the pattern shown.
The short-term picture has turned mildly bullish with TLT's so-far timid poke above the Hidden Pivot midpoint resistance, p=88.91. It's not too late for a decisive blast through it, but we'll reserve judgment on the strength and durability of the rally until we've seen more. A conventional 'buy' signal has been in effect since TLT first touched the green line (x=86.95) two weeks ago. I'd rather buy on a pullback to the green line from our 'sweet spot' above p, however, and we should plan on doing so if the opportunity arises. _______ UPDATE (May 3): TLT did precisely what we needed, vaulting to the 'sweet spot' before receding toward the green line. The move has created a price we can bid 'mechanically' with confidence. The trade should be good for at least a one-level move, from x=86.96 to p=88.91, with a stop-loss at 84.99.
[My prediction three weeks ago that the bear market had seen its worst seemed crazy at the time -- particularly to me, because I'm an inveterate permabear. However, last week, bulls distanced themselves further from the low of the mini-crash that occurred when tariff panic was in the air. I'd said the selling would take the S&Ps no lower than 4820, and that is almost exactly what occurred: a 4835 low marked the bottom of a 1312-point plunge. If it also caught the bear's last gasp, that would mean everyone taking pot-shots at Trump for screwing up the world is flat-out wrong. In any case, I will continue to run my original commentary (see below) until SPX proves me wrong by relapsing decisively below 4820. I have reduced the odds that the low will survive to 50-50 because the continuing rise in long-term rates could make it impossible for the economy to avoid a recession. But maybe that trend is about to peter out as well. In any case, it is still much better odds than most economists, the news media and the blogosphere are giving Trump and the economy. RA ] *** A word of advice if you’re looking for bankable information on the direction of the economy: tune out the mainstream media’s cavalcade of Trump-deranged bozos and focus on the 4820 target in the SPX chart above. Think of it as Trump’s lucky number, but also a very good place for these all-too-interesting times to find temporary equilibrium. That is my worst-case target for a bear market that many believe is only just getting started. As a die-hard permabear myself, I’ve been eagerly anticipating the Mother of All Bears since, like, 2010. The global economy was badly in need of a reset and still is. It will
T-Bonds and stocks came down so hard today that I now give my ‘outrageously bullish scenario’ (see above) no better than a 50% chance of surviving. Putting aside gold’s globally unnerving price surge, June T-Bond futures bulldozed a path down to as low as 100^12. If that were to happen, the implied rise in interest rates would be sufficient to tip the U.S. and global economies into deepest recession. A reported $7.5 trillion in Treasury debt needs to be refinanced over the next three years, with much of it due in 2025. It is therefore a particularly bad time for the Masters of the Universe to lose control of long-term rates. Beleaguered consumers will struggle even harder, and an already tottering commercial real estate market will finally give up the ghost. Residential real estate is about to deflate as well, putting a potentially economically rejuvenating refinancing cycle so far out of reach that Baby Boomers might not see another in their lifetime. Trump will get the blame, and deservedly so. Usually, economic cycles of boom and bust are much bigger than the presidency, but in this case, if stocks continue to fall, Trump will surely have been the catalyst. _______ UPDATE (April 25): Last week's rally left the futures a hair shy of an important Hidden Pivot midpoint resistance at 116^14. A decisive move through it would not announce that the bear market is over, but it would quietly suggest an important turn may be nigh. It would also imply the futures are on their way to 121^11, a Hidden Pivot that would leave the June contract just short of a breakout. The pattern will not be comfy-cozy for seasoned Pivoters, but I am using it nonetheless, in part because of its obscurity. (Always keep in mind our rule concerning
There are idiosyncratic reasons for selecting the reverse pattern shown, but its main purpose is to bring visual clarity to the 'mechanical' buy signal that would trigger if MSFT touches the green line (x=362.44), which it almost certainly will. I was unable to drag the 'a' low into the picture, but if you want to replicate the chart, it lies at 385.58 (8/5/24). There's plenty of potential here, although I would find a way around the textbook stop-loss at 344.78. A 'camo' trigger fashioned from the 5-minute chart would allow you to test the water without risking more than relative pocket change.
