Are T-Bonds in a bear market, or merely consolidating a longer-term bull? A weekly chart going back to 2012 yields a mixed picture, albeit one that is tradeable. The uptrend begun six months ago is bullish insofar as it exceeded the 'd' target of the rABC pattern shown (see inset). But it is coming off a low that broke a major support from January 2020, creating an impulse leg almost as powerful as the bullish one that spiked the futures to spectacular heights when the pandemic first hit in March 2020. Some traders will also see the contours of a very long-term head-and-shoulders pattern in this chart. I am not a big fan of them, although I'd have to concede that imposing one here is relaxing -- which is to say, mildly persuasive -- to the mind's eye. For trading purposes I'll suggest using this bearish pattern begun from a small peak last January. It suggests minimum downside to 158^09 over the near term. We'll reassess trend strength once we've seen how sellers interact with that Hidden Pivot support. _______ UPDATE (Sep 29, 9:34 p.m. ET): The futures are struggling to put in a bottom somewhat above the 158^09 target given above. It remains theoretically viable, but for now we'll just have to see how it goes. It would be bullish for the intermediate term if a rally takes out some prior highs on the hourly chart without having dipped to 158^09 first. The nearest such peak lies at 160^27.
Bulls have been surpassing every benchmark in sight, including Hidden Pivot resistances of various degree and prior peaks such as the one at 146^21 labeled in the chart (click on inset). We'll need to see a pullback and a follow-through (C-D) leg to get a precise idea of how much buying power is behind the rally, but the fact that we've seen no retracements on the daily chart for two weeks is certainly encouraging. The move has been strong enough that even a pullback to as low as 143^00 would not diminish the promising look of the daily chart. Turning the weekly chart bullish is another matter, however, since that would require a rally exceeding 164^31, an important peak that lies far above. A print there would break the back of the bear market begun nearly three years ago. _______ UPDATE (April 10, 8:57 p.m.): Bulls have shown no spunk lately, but the short-term picture is mildly bullish nonetheless. You can use the 147^17 target shown as a minimum upside objective if the futures leap above the red line (146^05). ________ UPDATE (April 12, 5:05 p.m.): The futures came down so hard today that it will offer a good test of the 'mechanical' buy signal tripped at 145^15 (the green line), stop 144^24. I'm recommending that you paper trade this one to increase your familiarity with 'mechanical' trades, most particularly unenticing ones like this, which I'd rate a mere '6' out of 10. _______ UPDATE (April 16, 5:35 p.m.) A gratuitous feint beneath 144^25 this morning stopped out the trade. Since there are now fewer bulls aboard to weigh the futures down, the so-far spritely bounce should easily carry to 146^16 or higher over the next couple of days. If not, take it as a sign of more weakness to
Lately I've focused mainly on what T-Bond futures would need to do to get out of serious jeopardy. A rally to 147^27 would be a good start for the March contract. But suppose the next big move is down, not up. The new chart shows that the June contract could fall all the way to 127^31 in search of a solid bottom. That would equate to a rate of 3.75% on the 30-year, currently trading around 3.13%. I cannot predict what the U.S. and global economies might look like if that were to occur, but it's a pretty good bet that the housing and auto sectors would be in a deep funk. Wouldn't the implied recession bring rates back down? Indeed it would, although it might take an extremely steep plunge in economic output to cause this to occur. For me, at least, the scariest thing of all is my very long-term target for interest rates on long-term Treasuries. I've projected 0.6% (!), but I would not deign to predict what the economy would look like at that point. Point-six percent on the Long Bond -- and, correspondingly, zero-point-zero on the Ten-Year -- are not so farfetched if you can imagine every investor on the planet fleeing to 'quality' in the space of just a few weeks. _______ UPDATE (March 13, 10:53 p.m. EDT): A rally to the 145^05 target shown is in-the-bag, but the short-to-intermediate-term picture would brighten even more if bulls can close this vehicle above that number for two consecutive days or trade more than six ticks above it intraday. ________ UPDATE (March 14, 7:14 p.m.): The futures rallied to within a tick of the 145^05 target I'd proffered here yesterday as a lock-up. To be certain the rally isn't just a flash-in-the-pan, let's set a high
March T-Bonds decisively exceeded a crucial threshold at 145^10 that I'd noted here earlier, generating a bullish impulse leg on the daily chart for the first time since November. Buyers exceeded an 'internal' and an 'external' peak, suggesting there's some gumption behind this rally. What would it take to end the bear market? From a Hidden Pivot standpoint, the upthrust would need to get past the 147^23 peak that I've labeled in the chart; moreover, it would need to do so without correcting significantly along the way. Rather than pretend we've got a crystal ball, let's let the futures tell us whether the big picture has changed significantly.
March T-Bond futures have now closed for two consecutive weeks below the 145^02 midpoint support of the big downtrend shown. This is quite bearish, implying as it does that a further fall to 130^20 could lie ahead. Odds of this will shorten if and when the key low at 142^31 recorded in September 2014 gives way. If the 130^20 downside target is reached, it would correspond to an interest rate of about 3.74% on the 30-Year -- up very dramatically from a current 3.13%. That would obviously have a very significant impact on a U.S. economy that has become dependent on ultra-low interest rates. CNBC's panel of 'experts,' including Maria Bartiromo, said recently that rates above 3% would be no big deal, since the U.S. economy has survived rates well above 10% on long-term bonds. This is idiotic, since the high rates did not follow a period of extremely low rates such as we have had for the last decade. Rates above 4%, if not an even lower threshold, will crush the housing and auto sectors and set stocks falling so hard that last week's big sell-off will look relatively mild in comparison. _______ UPDATE (Feb 13, 8:33 p.m.): I've grown unaccustomed to providing bullish updates for T-Bond futures, but the rally begun on Monday deserves our attention. The key hurdles lies just above, at the 145^01 midpoint pivot (click here for chart). If it is easily exceeded, that would shorten the odds of a further ascent to D=145^30. That's where the real test will take place, since a quick move past it would suggest the rally is likely to get legs. _______UPDATE (Feb 14, 6:45 p.m.): So much for that rally. It got turned into a blip by today's slide. _______ UPDATE (Feb 15, 9:35 p.m.): Set a screen
The chart is one of the most important we have considered; for if T-Bond futures are about to fall to the 130^20 target shown, we will be living in a very different world, economically speaking. For one, it would imply that rates on the 30-Year Bond, currently around 3.1%, are headed to at least 3.6%. Could the economy handle this? The answer, manifestly, is yes, since the implied rate rise could not occur in the first place if at some point along the way it sends the economy into recession. But it would surely bring the economy to the brink of one even under the most optimistic assumptions, since mortgage and auto lease rates would be at asphyxiating levels. The most likely scenario I can imagine: The economy, far from booming as the current, shrieking hubris would have it, stagnates at 2% real growth or less. As for a serious outbreak of inflation, I am still very much in the deflationist camp, extremely skeptical that inflation is possible other than in stocks and real estate. Returning to the technical picture, the 145^02 midpoint Hidden Pivot support shown in the chart must hold if the futures are to avoid a collapse down to 130^20. Friday’s breach of the support was slight, and its location is inexact because the chart is blended from many contract months. My guess is that the ‘true’ support lies about a point lower, near 144^02. In any case, we’ll be watching this vehicle closely for a nasty downdraft from these levels, since that presumably would signal a steep rise in interest rates. (Note: My earlier forecast for 3.11% on the Ten-Year Note still obtains. On Friday it hit 2.85%, up from 2.55% when the forecast first appeared here.) _______ UPDATE (Feb 5, 7:03 p.m. EST): The futures
T-Bond prices got pounded as last week drew to a close, but it left the futures trading only marginally beneath the previous Friday's settlement price. The daily chart (see inset) shows a bigger picture that makes clear the corrective nature of any selling. It is difficult to imagine why some investors evidently still don't 'get it', even though long-term bonds have been in a bull market for more than three decades. No matter. Their desire to trade Treasurys for 'risk-on' assets creates bargains for us while pumping up the garbage that we should always look to sell short. So what comes next for this vehicle? It spent most of Friday playing toe-sies with the 165^11 target of a corrective pattern begun on Wednesday. We'll give it some time to get traction, even if that require a few more days spent groping moderately lower lows. For real-time guidance when a tradable turn comes, tune to the chat room. You could also look for a 'counterintuitive' entry opportunity on the hourly chart. Currently, the relevant pattern, which would trip a buy signal at 166^10, comes from these coordinates: A=164^25 on 2/23); B=168^25 on 2/24); and C=to be determined. (Note: Basis the June contract, the corresponding buy signal would come at 165^01.) _______ UPDATE (March 2, 9:55 p.m. ET): A correction that began three weeks ago should find traction at 169^19, or possibly 161^29 if any lower. Bottom-fishing with a tight stop can be attempted at either number. On the 240-minute chart, a=170^26; or alternatively (on the 30-min) at 170^04. _______ UPDATE (March 6, 2:45 p.m. ET): Basis the June contract, I expect the correction to come down to 160^22 before this vehicle finds traction.
Much as we'd wanted a dip down to 157^03 so that we could get aboard for cheap, it was not to be. The pattern shown makes clear, however, that there's still plenty of opportunity for bulls -- most immediately, to the 164^23 target shown. I'll suggest getting long with a 'mechanical' bid at p=161^15 once that Hidden Pivot has been exceeded by at least half a point for three consecutive bars. The implied stop loss, a third of the approximately 3.25 points we stand to make if D is reached, should be placed at 160^07 upon entering the trade. _______ UPDATE (Feb 3, 2:52 a.m. EST): Tuesday's explosive rally brought the futures to within less than a point of the 164^23 target we've been using to keep in step with the bull market. I expect a pause there, but my long-term outlook remains extremely bullish, with a prediction that rates on the 30-year will fall as low as 1.64%. That would be half of the recent, corrective high._______ UPDATE (February 8, 9:50 p.m.): Bulls made short work of an ostensibly daunting target at 164^23, suggesting there is plenty of buying power remaining. However, the futures are due for a well-earned rest, so be prepared for the rally to flame out near these levels. They are currently stalled at the 166^29 target of the pattern shown, but any higher would indicate more upside to 167^22, a Hidden Pivot calculated by sliding 'A' down a notch, to 158^06. I seriously doubt the futures will push past 167^22 without pulling back first, possibly substantially. If they surprise by crushing the pivot, however, we can infer that it is a bullish tsunami that is driving this phase of the bull market.______UPDATE (February 9, 6:50 p.m.): The futures spiked to 167^09, less than half-a-point from
The weekly chart looks ripe for bottom-fishing, assuming the March futures come down to the 157^03 midpoint Hidden Pivot shown. A 'mechanical' bid there, using D=164^03 as a price objective, would take a 154^24 stop-loss. The implied entry risk would be around $2300 per contract, but we can cut it down to size using 'camouflage' to initiate the trade on an ABCD pattern of much lesser degree. I've set a screen alert to tell me if and when the opportunity ripens, and you should do the same. Tune to the chat room for guidance in real time if the alarm sounds.
Since April, the futures have been consolidating bull-market gains that took more than four years to achieve. In the long-term composite chart shown, there are two especially encouraging signs for the future. For one, the peak at 166^27 recorded in April exceeded a crystal-clear target at 164^08 by two-and-a-half points. In context, and considering the clarity of the large ABC pattern, the overshoot is not merely significant but decisive. The second encouraging thing to notice is that the consolidation pattern toward the right-hand axis of the chart has broken well above a 159^09 midpoint Hidden Pivot, telegraphing an impending bull leg to at least 165^08, or possibly 171^07 if any higher. Notice that I used the word "impending" rather than "imminent." That's because there is no way to tell exactly when the next bull-market leg will get decisively under way. However, that this will happen should not be doubted, given the eagerness with which the futures blew past p=159^09 back in August. My hunch is that the futures are biding their time, waiting for evidence of a global recession before they blast off, fueled by flight capital from around the world. Keep in mind that the rally targets noted above are destined to become mere weigh stations if my extremely bullish long-term forecast for Treasurys pans out. As noted here earlier, I expect rates on the 30-year to fall to 1.64%, about half of their recent peak, before the bull has run its course over the next 4-5 years. Were this to occur, a fixed-income portfolio weighted toward the long end of the yield curve would enjoy spectacular capital gains.
