T-Bonds

The steep plunge of the last two weeks stopped just shy of a key Hidden Pivot support at 118.43 on Friday, but if it fails, look for a washout down to 115.84. That would correspond to my worst-case target for December T-Bond futures, 150^28, and a long-term interest rate of about 3.21%.  Rates on the 30-year were as low as 2.75% just a month ago, so the increase would be quite spectacular. It would also be devastating to a housing market whose buoyancy has helped sustain the illusion of economic recovery. All eyes will be on long-term rates as the week begins, since, from a technical standpoint, just a little more pressure could burst the dam. _______ UPDATE (November 16, 11:12 p.m.): The 118.43 Hidden Pivot has been breached, but only by 41 cents so far -- not quite enough yet to tip the odds in favor of a further fall to 115.84.  Alternatively, the stock would have to rally to at least 121.26 for bulls to go on the offensive._______ UPDATE (November 30, 10:17 p.m.): TLT popped on Monday to 121.53, the precise midpoint pivot of the bullish pattern shown (see inset, a new chart). A decisive breach of this 'hidden' resistance would indicate more upside to at least p2=122.15, or possibly D=122.77 if any higher.________ UPDATE (December 9, 12:01 a.m.): The rally targets a minimum 123.37 short-term, but an easy move through that Hidden Pivot would confirm that bulls have significantly more-ambitious goals for December.

The ABC pattern shown holds the key to T-Bonds over the next four to six weeks. Although my long-term outlook is very bullish and calls for a fall in 30-year rates to as low as 1.64%, a potentially sharp correction could be imminent. If so, it would be signaled by a decisive downside penetration of the red line, a 'midpoint Hidden Pivot' support at 155^24.  Notice that this support has twice contained selloffs since early October. The fact that each bounce came exactly at the pivot not only lends authority to the pattern, it also implies that a significant breach of 155^24 -- meaning one that hits 155^00 or so -- is likely to continue to at least 153^10, or even 150^28. That would correspond to an increase in long-term rates -- currently around 2.93% -- to, respectively, around 3.10% or 3.21%. _______ UPDATE (November 3, 8:41 p.m. ET): The bonds have looked like hell since August, and yesterday's dive only added to a negative intermediate-term picture. Since the plunge exceeded  155^24 by more than a point, we should brace for more downside over the near term to at least 153^10, or possibly even 150^28, as noted above._______ UPDATE (November 16, 11:40 p.m.): The futures have been rallying for a week, but not with enough vigor to get out of trouble. For starters, that would take a push exceeding the 154^18 peak recorded November 6 on the way down. _______UPDATE (November 22, 11:52 p.m.): Bulls have exceeded the 154^18 peak flagged above by half a point, implying that the pullback since is a consolidation.  A mechanical bid at 154^00, stop 153^17, already has been signaled for a ride to as high as 155^13, but I would instead suggest cutting down the implied entry risk of $333 with a 'camouflage' entry

Friday's decisive push past a major Hidden Pivot midpoint resistance at 158^27 has put a 165^29 target in play. This would complete a bullish pattern begun in mid-July that is itself part of a powerful bull-market phase that began in 2011.  If the futures were to surpass 165^29 by 1.00 point or more within a week of first touching that price, I'd infer they were on their way to 171^01.  If the lower number (165^29) is achieved, that would correspond to a fall in long-term interest rates to about 2.476% from a current 2.826%. The 171^01 target would correspond to a rate in the 30-year of about 1.639%.

The futures have broken down again and could now fall to as low as 150^03 before finding traction. The corrective pattern shown is not very intuitive, but I've chosen it nonetheless because it has features that I like, including a rally precisely to p yesterday after the pivot was breached Tuesday afternoon. The futures became a 'mechanical' short at that point for a ride down to 151^14, a secondary pivot that can serve for now as our minimum downside target.  If you want to try bottom-fishing there I'd suggest a three-tick stop-loss. If 151^14 gives way easily, the 150^03 target will be in play. _______ UPDATE (September 17, 9:45 p.m. EDT): The futures trampolined sharply higher yesterday off a bottom at 151^25 that was well above my 151^14 target.  This is a positive development, but let's make bulls push the rally to at least 156^03 before we infer that the correction begun in early April is over.  _______ UPDATE (September 24, 7:46 p.m.): Very impressive indeed! The futures exceeded a clear Hidden Pivot target at 157^08 with yesterday's surge, implying that the 165^29 target of a far larger pattern is now in play. Odds of reaching it will shorten if bulls can blow past the 158^27 midpoint resistance associated with the target. The pattern displays nicely on the 240-minute chart, where A=147^13 on July 13 (see inset).

Yesterday's bounce came from an interesting -- and potentially important -- place: four ticks beneath the midpoint pivot of the bearish pattern shown. If it is eventually breached, that would indicate more downside to at least p2=150^21. However, bulls deserve the benefit of the doubt for now, since the bounce is bullishly impulsive on the hourly chart. Ending this nasty correction, now in its third week, would take a rally exceeding the point C of the pattern, 156^11, but the futures are nonetheless a bull trade at the moment.

"Is China Dumping U.S. Bonds?" Of course they are!  Even so, MSNBC evidently thought it necessary to run that headline with a question mark at the end. How else to explain why T-Bond prices would fall on a day when stocks around the world were getting slammed. This has happened twice in the last week, and it suggests that a seller big enough to negate the flight-to-safety effect has been liquidating U.S. paper by the ton. Only China and Japan hold enough of it to have such an effect, but BOJ is not suspected of dumping.  Just why the Chinese would is a mystery to me, and probably to many others. Do they need physical cash to shore up their own banking system as stocks plummet? Are they attempting to monetize by un-sterilizing the government's purchase of Chinese corporate bonds? We remain very bullish on T-Bonds, even if the next big rally might have to wait until investors sniff out a global recession or worse. From a technical standpoint, the futures could still ratchet lower to the 152^25 target shown.  This is by no means a done deal, given the trouble bears have had pushing the futures beneath the p2 pivot.  In any event, traders can buy there aggressively with a tight stop if the opportunity should arise. You can step up your size if you've been short for at least a part of the ride south from 153^21. ______ UPDATE (September 7, 11:24 p.m.): The futures have built a base after going no lower than 153^23. It will become more meaningful if they can rally above 157^27 in the days ahead.

Yesterday powerful thrust turned out to be a bull trap, but it must be viewed in the context of a healthy uptrend that has miles and miles to go. Even so, it will take bulls a while to get their courage back for a push into heavy supply near 164 that accumulated last April. This will be made easier because yesterday's push blew past a small but important 'external' peak at 161^17 recorded exactly four months ago. For now, we'll use the A-B impulse leg this created to generate a buy signal in the days ahead. The point 'C' low has yet to form, but if and when it does, the rally will need to get past the midpoint resistance of the rally leg to imply bulls are rested for another big push. _______ UPDATE (August 26, 12:41 a.m. EDT): The selloff from Monday's high has been nasty, but it should be regarded as fright-mask stuff until such time as it takes out last Wednesday's low, 156^30.  That would do the sort of technical damage that would call for a reassessment of the short-term trend.

The slight push past the midpoint resistance at 158^13 is probably sufficient for us to infer that the futures will achieve p2=160^00 over the near term, or perhaps 161^00 if any higher. Pivoteers should notice the nice 'counterintuitive' buy signal down at 157^31. This type of pattern has been the focus of Wednesday tutorial sessions in recent weeks. ______ UPDATE (11:17 a.m. EDT): Today's bullish blast topped at 160^03, three ticks above the target I sent out last night. One more to go in this minor rally cycle: 161^00. _______ UPDATE (August 22, 4:15 p.m.): Friday's thrust brought the futures to within five ticks of the 161^00 rally target flagged above.  My hunch is that bulls are about to bust through it, in which case my new target would be 162^13.

T-Bonds have had quite a run since June, so we shouldn't read too much into the selloff from Wednesday's highs.  We'll pay close attention to corrective moves nonetheless, since the way in which they interact with Hidden Pivot supports can tell us how much more selling remains. This pullback has already breached the midpoint pivot of the minor pattern shown, implying it will reach p2=157^15 before bulls can turn things around. Any lower would indicate a minimum 157^01, but we'll see how well this number absorbs the blow before we make any further judgments. If the futures reverse and exceed 159^28 without having reached 157^01, that would imply that buyers are back in the driver's seat. _______ UPDATE (August 17, 9:06 p.m.) The 157^15 target nailed the tradable low of a two-point rally -- worth as much as $2000 per contract -- within three ticks. If you got aboard, please let me know in the chat room and I'll establish a tracking position. Otherwise, we'll continue the hunt for bull plays. The current rally cycle, which began last Monday, looks bound for a minimum 161^14 if it can take out the midpoint pivot at 159^13 where it stalled yesterday. Resistance -- potentially tradable -- at p2=160^14 would likely be felt along the way. _______ UPDATE (August 19, 9:53 a.m.): The futures have bounced from just above p2 of this corrective pattern (on the 60-minute): a=160^22 (8/12); b=157^12 (8/14); and c=159^11. The fact that p2 was not quite reached is speculatively bullish, but if it eventually gives way we should prepare for a slide to as low as D=156^01 before this correction has run its course. That last number would be a back-up-the-truck 'buy', tightly stopped, as far as I'm concerned.