T-Bond

Our bear-market target has been 129^03 for quite some time, but price action at the p midpoint of a lesser but even more bearish pattern suggests we should lower our sight to 127^16. As I mentioned toward the end of last week, this would equate to yields on the 30-Year of about 4.12%-4.15%, and 3%-plus on the Ten-Year. If the move happens quickly -- i.e., this week -- those who still cling to the absurdity that the latest housing boom is  other than a dead duck are apt to capitulate, with very negative implications not only for yield-based calculations but for the broad stock-market averages as well.

July's moderately pitched rally left a very bearish target at 129^03 intact, and odds of a finishing stroke achieving it will increase if the futures dip again beneath the 132^31 midpoint support. From a trading standpoint the September contract is a flip-of-the-coin play at the moment, although the short-term opportunity would shift to bullish if the futures were to surpass the microscopic, look-to-the-left peak at 134^25 and pull back in b-c fashion. _______ UPDATE (July 31 at 12:30 a.m. EDT): Sellers have been pounding on a crucial midpoint support at 133^16 for more than a week (see inset, a fresh chart), but if it fails decisively, as appears likely, look for the futures to continue down to at least 130^04.

We've been focused on a long-term bear-market target at 135^05, looking for any hint that the Fed is about to step in to reverse the steady price erosion in this vehicle before investors hit the panic button. A lesser but still significant target at 137^07 may provide clues concerning the near-  to intermediate-term, however, as well as a place to attempt bottom-fishing. This target is quite clear and has already been confirmed by precise price action at the 'p' midpoint, so you could conceivably step in with a bid at 135^06 and a stop-loss as tight as three ticks. However, and as always, camouflage will be the preferred entry tactic. Regardless of whether you trade the target, you should expect it to work precisely as a minimum downside objective. _______ UPDATE (June 19, 11:20 p.m. EDT): The futures have kissed the 137^07 target noted above, setting up a possible bottom-fishing opportunity for 'camo' traders. I'd suggest looking for your opportunity on charts of 15-minute degree or less. _______ UPDATE (June 20, 9:06 a.m. EDT):  Wow, I'm impressed.  The 137^07 support held for all of three hours before a steep plunge turned it into resistance. The selloff came within a little more than half-a-point of the longstanding, 135^05 target noted above -- a major bear market objective, as far as I'm concerned.  Because it comes from a continuous (i.e., blended) chart, however, it is unlikely to prove precisely reliable. To winnow down the possibilities of where an important low is likely to occur, I'll use the September contract, as before, but with a new point C low revised to reflect recent price action. This yields an attractive target at 134^15, a Hidden Pivot that should provide a decent foothold for camouflageurs. _______ UPDATE (July 1, 3:06 a.m. EDT):  Important Hidden Pivots

My bear market target at 135^05 is well below these levels, but we're still on the lookout for signs that the Fed will step in -- as they always have in recent years -- to reverse price erosion before investors hit the panic button. Signs are ever-so-mildly bullish with the impulse leg generated yesterday on the hourly chart. The pullback shown low may not hold, but if does we should look for a thrust to p=142^04 at a minimum, or to D=143^07 if any higher.  The move could conceivably set up an appealing bull play for camo traders once the entry signal is tripped, but you may need to zoom down to the 15-minute chart or less to keep risk down to a four-tick minimum.

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.