T-Bond

The 140^14 correction target drum-rolled here yesterday has been exceeded by eight ticks, or a quarter of a point. Ordinarily, because the pattern associated with that target is so clear, we might infer from even so small an overshoot s that significantly lower prices impend. In this case, however, we'll reserve judgment for now, since there was an important low at 140^02 (November 13)  helping to pull the futures down.  Which is to say, the "magnetic" attraction of that low overpowered the Hidden Pivot support.  Now, the  December contract would need to hit 142^04 today to get out of immediate jeopardy, since that's what it would take to generate a bullish impulse leg on the hourly chart.

The stock market was in the throes of a monster rally as this tutorial session got under way, with the Dow up more than 400 points and the E–Mini S&P inches from a target that could temporarily cap the rally. More important than all of this was a T-Bond selloff, the resolution of which may tell us whether the Western World is about to embark on a hyperinflationary course. We set a screen alert at a key downside target of the December T-Bond futures, there to await a result.

Doug McLagan and I were on the same, bullish track when we posted, respectively, bullish touts for the December Dollar and the NYBOT Dollar Index. Note that this is corroborated by the improving outlook for the December T-Bond. Some may have given it up for dead, but it has moved within easy distance of a peak1 whose breach would create a powerful impulse leg on the hourly chart.

Just when you're ready to give up on the Bonds, they whip around and uncork the nastiest rally in a month. The high shortly before 4 a.m. EDT has tied an important external peak recorded a week ago, and it would take but a further 3/4 of a point from there  to knock off a second 'external' at 141^00, creating a powerful bullish impulse leg on the hourly chart.

It would take just a modest rally to get past two 'external' peaks on the hourly chart. If it happens today, take it as a sign that yesterday's sharp thrust will not prove to have been a one-day wonder. Your screen alert should be set at 140^19, since that's where the move would turn impulsive on the intraday charts.

Who would have imagined just a few short years ago that a torrent of capital from all over the world would ultimately seek safety in the bonds of a country whose debts, public and private, and unfunded liabilities tally an estimated $160 trillion dollars?  That is very clearly what is happening, and it seems entirely predictable that it will all end badly once the entire financial world has piled onto the same side of the trade. Be that as it may, you can see in the continuous monthly chart a Hidden Pivot rationale for further upside to at least 152^02.  This target comes from a continuous chart and should not be used for precision shorting, but it is nonetheless valid as an analytical benchmark. If so, 4 percent mortgages are coming as promised, even though it is doubtful that many borrowers will qualify.

Volatile action has negated a downside target at 134^09.  Although this hasn't canceled the downtrend itself, a midpoint rally target at 141^17 is also in play now and can serve as a minimum upside target if buyers catch fire after Labor Day.

A midpoint support at 136^25 has been violated by half-a-point, suggesting more downside  awaits to 134^09.  Accordingly, we should try to get short near the 137^28 midpoint resistance of the retracement pattern shown.  Entry should be via camouflage only, based on the first bearish abc that occurs on the 15m chart or less. Please note that if the futures push higher without correcting to suit our needs, the logical rally target would be 139^11.

How silly of me to think that because the S&P downgrade coincided with a rally by this vehicle to a moderately important Hidden Pivot target, that -- just maybe -- an important top was in. Perhaps it was just a lack of imagination that caused me to overlook the possibility that speculators would stampede to the supposed safety of the very vehicles that had been downgraded?  Anyway, it is now clear that the 143 target given here earlier is in play, along with the prospect of long-term yields falling below 2.5%.  The bonds seem to be sniffing economic Depression, and who are we to argue?