T-Bond Futures

The futures failed to create an impulse leg on the daily chart at the top of the last rally, so we should look for the correction to come down to at least _____. That would represent a 0.618 retracement of the move off last Thursday's lows, but any lower would corroborate our suspicions of latent weakness (i.e., of a bear rally).  Alternatively, a thrust to the upside exceeding _____ would turn the lesser charts bullish and give the futures a shot at, most immediately, _____, or as high as _____ if that number is exceeded on a closing basis.

Except for the booster stage of this rally, it's been just mincing steps. The implied power of it would ratchet up a few notches, however, if it hits 117^27 by week's end.

We should judge this rally by how well it handles the two numbered peaks shown in the chart. To create an impulsive thrust of daily-chart degree, the futures would need to get past both peaks without an intervening pause lasting longer than a day. Until then, the sharp move off last Thursday's lows should be viewed as just a garden-variety bear rally -- a dead-cat bounce with nowhere to go.

The rally off Friday's lows may have looked ferocious to those who were short, but from a Hidden Pivot perspective it has been deliberate and even a bit timid at times. Notice in the hourly chart how each thrust over the two days of the rally has stopped shy of breaching all prior peaks to the left of it. Instead, the ascent has unfolded one low-wattage impulse leg at a time. As of Friday's close, the futures looked ready for yet another push -- to at least ____ if that Hidden Pivot's midpoint sibling at _____ gives way.  However, bulls will need to do just a tad better, pushing past a tiny, look-to-the-left peak at _____, to clinch their case; otherwise, it may require a re-test of the recent low at 111^21 to put in a durable base.

The bonds have fallen so hard in recent weeks that a targeted low that once seemed like Armageddon territory now lies within easy distance.  I broached two targets here yesterday, and both can be bottom-fished with a stop-loss as tight as 4/32nds.  The first lies at 111^07, the second at 110^07.  Either Hidden Pivot has the potential to produce a major low, so we'll keep  a close eye on any rallies that occur therefrom. _______ UPDATE: (2:54 p.m.):  Following a weak opening, the long bond is enjoying one of its strongest rallies in months, propelled by the hoard of buyers who showed up at today's Treasury auction unexpectedly clamoring for specious product. Since the rally is coming off a low at  111^21 that lies less than a half-point from our 111^07 target, we have to be alert to the possibility that this could be a major reversal.  Cancel the bid for now.

On the June T-Bond's daily chart, the clean lines of the downtrend strongly imply another leg down before sellers might conceivably be washed out. To be precise, the unachieved target lies at _____, a nasty fall from yesterday's settlement price of 115^02.  The bearish outlook is corroborated by the ease with which sellers punched through the midpoint sibling of the target, 118^00.  Another negative is that downside targets derived from two lower point 'A' alternatives -- labeled A1 and A2 here --  have already been exceeded.

We've been using a HiddenPivot at 112^09 as a minimum downside objective, but I'm going to lower it to _____, a Hidden Pivot that comes from the hourly chart  (where A=123^10, on May 21).  The midpoint sibling of that target, 115^15, was breached by a full point on Friday, increasing the likelihood that the target itself will be reached (although a two-day close above 115^15 would hint of a reversal). We'll switch over to the September contract tomorrow, but for your information, the equivalent targets lie respectively at _____ and  ______. 

Bulls looked powerless yesterday to reverse a downtrend that has been alleviated only by short covering for a day-and-a-half earlier in the week. The futures would need to push above _____ by week's end to suggest the Plunge Protection Team is doing its job, but otherwise they'll have their hands full just trying to keep this barge afloat.

The bearish pattern shown in the chart projects to 112^09, an implied disaster that would send yields soaring well above the levels that triggered scare headlines earlier in the week. For its part, Wall Street seemed not the least bit scared, since the broad averages have remained mixed. But if June Bonds are about to plummet to our target, that could put an end to the complacency that has contributed to, among other things, the powerful short-squeeze rally in bank stocks.