T-Bond

The steep rally of the last few days is closing fast on a 130^00 target given here earlier, shifting our focus to an even larger ABC uptrend with the potential to push this vehicle to as high as 132^27.  Although its sibling midpoint at 127^16 has already been brushed aside, buttressing the bullish outlook, any pullback approaching it should be viewed as an easy opportunity for camouflageurs to climb aboard.

While a scare-mongering news media continues to assault common sense with ceaseless blather about all the terrible things that are going to happen if Democrats and Republicans don't come to terms by midnight Monday, bond traders have been partying up a storm.  Who are you gonna believe?  If the steep uptrend in the September T-Bond is any indication of what's coming, the deadline is going to be the biggest non-event since Kohoutek streaked across the sky. Not that Brian Williams et al. will have noticed. T-Bonds hardly look worried and could continue to as high as 130^00 over the near-term, according to my technical runes.  Not exactly a harbinger of a default disaster.

I've taken another look at the 123^21 target on charts of various time frames, and it still looks compelling as a place for a top of at least intermediate importance to form.  However, if the futures were to blow past it, and especially if they were to do so effortlessly, it would have implications potentially so bullish that I've yet to imagine them. Using the continuous weekly chart, you could make a case for 137^08 (!).  The rally would kick off in earnest following an upside penetration of the 124^03 peak recorded in November. Frankly, I'm not quite sure what kind of world we'd be living in at that point, economically speaking, since it suggests among other things that all of the world's capital will have flooded into Treasurys -- presumably for the sake of  "safety." Incredible!

It wouldn't take much of a rally to create a bullish impulse leg of daily-chart degree, shortening the odds of an eventual push to as high as 126^11 over the next four to six weeks.  Specifically, if the futures exceed March 31's peak at 120^31  and then continue higher, surpassing 122^08 without a significant retracement, that would strongly imply that last week's low at 117^28 was an important one.

I continue to view this rally as a potential barn-burner, although I am clueless as to what might possibly drive it moonward.  On the basis of technicals alone, however, we were able to nail the recent low at 117^28 within three ticks. The rally that has ensued is promising, although the first significant pocket of resistance has yet to be hit. It lies near 120^28, but the futures will first need to conquer a lesser resistance, a Hidden Pivot rally target at 120^08.  An easy move through that number would portend a breakout above 120^28.

I alluded to a 117^18 downside target yesterday, but it came from a tiny netbook screen that was difficult to read. Using my desktop monitor, I now find that the actual number is 117^31, a Hidden Pivot support that has been slightly exceeded. Accordingly, and for purposes of developing a useful forecast, we should allow for the possibility that this bottom at 117^28 could turn out to be an important one.  The inference would be further strengthened by a thrust today exceeding a 119^05 peak made last Thursday on the way down.  As of yesterday's close, the futures were working on a bullish impulse leg on the hourly chart with the following coordinates: A=118^01, B=118^20, and C=?  If you're looking to jump aboard at whatever 'X' may form, I'd suggest finding camouflage on the five-minute chart.

There was nothing brewing in the news Sunday night to augur yet another flight to "safety," but if traders are nonetheless about to plow still more of their mostly cost-free money into T-bonds, they'll telegraph it by popping above 122^22, the midpoint resistance of the bullish pattern shown in the chart. This Hidden Pivot will remain valid as long s the point 'C' of the pattern, 122^22, is not breached to the downside. Alternatively, if the pullback begun from last Wednesday's highs continues, night owls could try bottom-fishing at 120^19, three ticks below a midpoint support (shown) whose correction 'd' sibling lies at 119^14.  I am not suggesting that you bid at the midpoint itself because it lies just a single tick beneath the structural support of a prior low.  ______ UPDATE: We did nothing, since the futures traded no lower than 120^25.

The flight to, er, quality continues, with bulls threatening to take this pup about to as high as 121^24 today. The futures were playing toe-sies with the 120^24 midpont resistance as we went to press, but the finishing stroke should be considered underway once the futures achieve some distance (i.e., 6-7 ticks) from it.  Any camouflage entry attempts should reference the midpoint. _______ UPDATE (1:28 a.m. EDT):  A hysterical flight to "quality" has caused the futures to blow past our target and to get within a single tick of the next: 122^13.  It can be found on the 30-minute chart using the following coordinates:  A=118^15 (3/9); B=121^04 (3/11); and C=119^24 (3/14).