T-Bonds

Treasury bond futures are targeting an important support level at a time when many traders are watching for the final top of the long bull market.  The sharp bond selloff of July 27 completed an impressive impulse wave down from an all-time high, and subsequent trading gives us a 'D' target of 148^6.  Important prior lows in the range from 148 down to 146 constitute a support zone whose breach might signal that the bull-market top is in.  Traders expecting the support to hold can look to get long near the 'D' target or to buy the bond ETF with ticker TLT around the 125.49 level.  (Posted by Doug “harry” McLagan)

The futures did yesterday what we should have expected them to do if they are bound for new all-time highs.  The 149^16 low occurred just 5 ticks beneath the midpoint support of the pattern shown, giving way to a spirited rebound that, while not yet impulsive on the 480-minute chart, need only push above 152^14 in the days ahead to generate a bullish impulse leg on the hourly.  Some may claim to see a bearish head-and-shoulders pattern in gestation, but Hidden Pivot Analysis suggests otherwise -- as you can see for yourself in the accompanying chart.

The minor bullish pattern shown has the potential to push the September futures to within pitching-wedge distance of two 'external' peaks on the hourly chart. The implication is that a relatively modest thrust could generate the kind of robust impulse leg that will put the futures on-track for a test of June 3's high at 152^19.  Camouflageurs looking to get long will have three peaks to play the in-betweens, as well as numerous smaller peaks on charts of lesser degree. _____ UPDATE (June 17, 8:52 p.m. EDT):  After peaking just three ticks from the 150^04 target shown in the chart, the futures have gapped lower Sunday night, denying us an opportunity to get short via camouflage or otherwise.  No further action is suggested for now.

As last week ended, one might have believed Wall Street investors had just about everything wrong.  Stocks were up sharply on bullish payroll news that flatly contradicted something every American knows – i.e., that the Great Recession is still very much with us; T-bonds were getting whacked on the flimsy assumption that the economy is picking up strength; and gold and silver were under attack because, well, because all was right with the world.  Even the hacks and scribblers who bring us the news did their bit to feed Friday’s feel-good binge.  For one, there was nary a discouraging word on the Web’s main news pages about Greece and its slow-motion bankruptcy – only a story about how Europeans were working diligently to protect the homeless from a cold snap.  And the left-tilting L.A. Times, thinking wishfully, weighed in with the most fatuous story of the day:  an analysis piece saying that the payroll numbers could prove to be a turning point in Obama’s reelection year -- the day when he shifted from slight underdog to favorite. All of which led us to post a link at Rick’s Picks to some sobering counterpoint in the form of an essay, Peak Money Arrives. Here’s an excerpt to ponder lest you grow giddy over Friday’s silly headlines: “The world is running out of money. If money is credit, and credit relies on confidence, there is not enough confidence in the financial system to supply the world with the money it needs. Since the initial credit crisis struck in 2008, credit and money have been withdrawn from the system in such staggering amounts that international trade can no longer grow. The world’s central banks are playing a rear guard action by acting as lender of last resort to banks that no longer trust

By popping through a 144^21 midpoint resistance Friday, the futures showed themselves capable of continuing to its 'D' sibling, 147^14, at least. Camouflageurs looking for a bullish handhold will need to zoom down to the 15-minute chart, since there are no 'external' peaks to be found on the hourly below 145^23.  On the '15', the first you'll find -- a very subtle look-to-the-lefter -- lies at 145^13 (on 12/20 at 9:30 a.m.)

This demo was done at the invitation of TradersLog.com and starts with a brief explanation of the Hidden Pivot Method. We then took a close look at some key charts that provide clues concerning how the global financial crisis might play out. Our focus was on long-term charts for T-Bonds, U.S. stocks, the dollar and the euro. The conclusions we drew are somewhat counterintuitive, most particularly a prediction that the euro will not crash when the PIIGs eventually default.

If DaBoyz can squeeze a 500-point Dow rally out of yesterday’s administered easing of dollar “swap” rates, just imagine what they can do with a little Santa seasonality and a dollop of year-end window-dressing.  Let’s be straight about a couple of things. First, no one expects the latest easing of global credit lines to resolve Europe’s debt crisis. And second, the 800 points the Dow has tacked on this week represent little more than trading machines masturbating each other amidst a short-covering panic. Some observers merely yawned, noting that the swap arrangements that make it easy and cheap – and now even easier and cheaper, if such a thing were imaginable -- for foreign banks to borrow dollars have been in place since 2007.  However, others saw the announcement by the central banks as nothing less than a bold step by the Federal Reserve to begin monetizing the debt of Spain, Italy, Greece, France et al. It’s a moot point whether the U.S. has begun bailing out Euro-deadbeats, however, since the U.S. is a deadbeat itself, albeit one in sole possession of the world’s reserve currency and therefore of the ability to gin up unlimited quantities of the stuff at will. Meanwhile, there’s little point in pretending that the U.S. is somehow not immersed in the bubbling cauldron of toxic global finance. U.S. banks had stopped lending to their European counterparts, and that’s why the Fed stepped in to pretend it has the situation under control. This may work for another week or so, if that long, but it’ll be interesting to see whether reducing swap rates to near-zero will help suppress sovereign borrowing rates that recently topped the 7% “red zone” for Italy. Would you lend the Italian government hundreds of billions of dollars at 7%? That’s what we

The dollar's strength has been weighing down everything but T-Bonds, so I've provided a chart with today's DXY tout that shows why we shouldn't expect the uptrend to die below 80. I've also spelled out what it would take for the Dollar Index to demonstrate conclusively that a bull market is under way.

And how did Treasury paper do following Standard & Poor’s bombshell downgrade of U.S. debt?  Why, T-Bonds, Bills and Notes came through unscathed, thank you. Actually, they did much better than that, rallying so sharply yesterday that one might have inferred the U.S. was the last citadel against the panic, confusion and fear that rein elsewhere in the world. Which is more or less true, relatively speaking.  We hesitate to describe yesterday’s tidal surge in Treasurys as counterintuitive, however, since, officially, U.S. debt is still rated AA+.  That’s a tad optimistic, if not to say delusional, given the fact that U.S. borrowing is eventually headed north of $20 trillion.  How could debt not be about to go parabolic now that Congress has discovered that the debt ceiling can be raised without exacting a fiscal price, or even a political one? Even so, and as the mortgage boom/bust demonstrated, institutional investors base their allocations not on fundamentals or even reality, but on the official say-so of the ratings agencies.  And although we all understand that the AA+ rating is conferred with a wink and a nod, it has always been in Wall Street's best interests to pretend to take it seriously. Keep in mind as well that neither Moody’s nor Fitch’s has gone along with the downgrade, at least not yet.  This will suffice to allow those who have been mindlessly pouring cash into the Treasury of a nation edging toward bankruptcy to credibly claim down the road that, at the time, the U.S. was still officially the safest place on earth to park one’s cash.  They’ll be correct about that, too, since U.S. Treasury paper has become the only sanctioned safe haven for the very biggest money.  George Soros undoubtedly recognized this when he decided to shut down Quantum.  These