TLT has a long way to go to recoup losses since 2020. The chart shows three daunting resistance numbers at relatively lowly levels that eventually will give way. However, we should be grateful that this ETF proxy for Treasury Bonds is unlikely to approach covid-era highs near 180, since that could only imply a world in deep economic depression. The recovery of U.S. Bonds has unfolded slowly since TLT bottomed at 82.42 eight months ago. The gain off the lows is about 14%, and while that might not seem like much, it is impressive considering the staggering amount of U.S. paper dumped on the market in the past year by sovereign holders, particularly China and Russia. Although the dollar and its unbreakable lock on seignorage may stir up the envy of other nations, they cannot remain players in a financialized world if they stray too far from the greenback. That's why last October's lows for T-Bonds may yet endure, even as forecasts of their demise and the bankruptcy of the U.S. persist. Even in bankruptcy, the U.S. will still look like a safe haven to the rest of this blighted, godforsaken world.
Bolstered by inflation news that sent stocks into a tizzy, TLT made dramatic progress last week toward the 95.40 target shown. The durability of this Hidden Pivot target will test bulls' mettle, as will an 'external' peak at 95.02 recorded back in late March. Together, they will offer formidabe resistance to the uptrend, and their breach would signal a continuation of the rally. The next significant structural resistance above 95.02 lies at 96.40, and thence 98.67. There are voodoo number between each of these peaks where TLT can be shorted (or T-bond equivalents bought), so stay tuned to the chat room if you're looking for real-time guidance.
Friday's shakedown was the most brutal we've seen in, well, weeks, but we can infer it was merely corrective, since the high which preceded it exceeded the important 'external' peak at 92.76 recorded on April 4. The downtrend has farther to go nonetheless, and if you plan on bottom-fishing, I'd suggest waiting until TLT falls to at least 90.31. Please note, however, that a failure of that "hidden" support to hold would imply more slippage toward the important low at 88.68 that occurred on May 29.
On the evidence shown, I'm unwilling to call this one, at least not yet. TLT tripped a theoretical 'buy' signal when it touched the green line (x= 91.88) two weeks ago, but the odds are not yet good that it can complete the implied trek to D=105.49. Long-term interest rates would be well below 4% if that were to happen, implying the U.S. would be in the throes of a recession deep enough to kill consumer inflation. That seems likely to occur at some point, but it would probably be sooner rather than later, since another powerful wave of inflation is already in the pipeline due to soaring shipping costs that are hitting now. Regardless, if TLT can push without a breather above the April 4 'external' peak at 92.76, that would shorten the odds that a big move is under way.
The gap opening above the green line last Wednesday triggered a theoretical 'buy' signal on the daily chart. It was the third such signal this year, but because it is coming from a lower corrective low, odds are better that the low, 87.34 (4/25), will endure. Adding to the incipiently bullish picture, the week's summit exceeded the highest 'd' target that could have been projected using an rABC pattern on this chart. It's a long way to p=96.06, where price action could help us handicap the odds of D=104.78 being reached, but that Hidden Pivot target can serve as our minimum upside objective for now
TLT's tortuous descent has depleted whatever energy may have been imparted to the trend by last autumn's impulse leg. Under the circumstances, we shouldn't count too heavily on the downside target at 85.94 to provide a precise turning point for bottom-fishing. We can still do the trade with a camouflage trigger that will risk only small change, but let's also allow for the possibility that this erstwhile cinder block has finally carved out a bottom. Odds of this would shorten if the still youthful rally surpasses April 12's 90.95 peak without a pullback on the daily chart. _______ UPDATE (May 10): Bulls showed a little life last week when they popped above an 'external' peak at 90.95 from April 12. This created an impulse leg of daily-chart degree, shortening the odds that an important bottom is in. Now let's see if buyers can complete the small ABCD pattern shown to its D target, or even exceed it. That would be the most bullish sign we've seen in this vehicle since last autumn.
So much for the extravagantly bullish speculation that I allowed in the last few touts and in a recent commentary. This vehicle continues to look like hell, and so we'll revert to the still unachieved downside target at 80.84 as a minimum objective. An upthrust of 4.44 points would be reason to open our imaginations to the possibility of a bullish reversal, and it would shift our trading bias to bullish. However, until such time as that happens, there is no reason to think that the powerful rally in Q3 was other than a nasty tease.
Bulls continued to lose ground last week, but the weakness was not quite sufficient to push this vehicle beneath the 82.42 point 'C' low of the bullish pattern we have been using speculatively. If the pattern were to hold sway, which is looking increasingly doubtful, an extended uptrend could take TLT as high as 150.22. That implies a spectacular bull market, one driven by vanishing inflation and expansionary yield curves. This seems so unlikely at this point that we should view any upturn in TLT with caution, if not to say suspicion, Realize in any event that it would not be unusual for a bull market to be born in obscurity and for no apparent reason.
TLT looked like hell again last week, as usual. However, I will accentuate the positive for a rare change, as I did in this week's commentary featuring T-Bond futures. Turns out 2024's downtrend in both vehicles occurred within the context of respective reverse-pattern buy signals. Yes, it's a stretch to think both will turn higher without taking out their 'C' lows, especially since they've been falling since the first quarter of 2020. But if you're willing to consider the contrarian point of view, the picture for bonds has been so gloomy for so long that perhaps it's time to consider the bullish possibility.
I warned here last week that if TLT couldn't hold above the 91.20 Hidden Pivot support shown in the chart, we'd better look out below. It now appears that the support will fail, sending this T-Bond proxy into a vast void that extends all the way down to last October's low near 82. If that happens, we'll see a corresponding spike in rates that approaches or matches the 5% peak in the Ten-Year recorded last October. This is yet one more reason why the mass psychosis that has driven stocks into a relentless vertical climb is about to succumb to reality.
