T-Bonds

The distributive pattern shown in the chart points ostensibly to 112^28, and that's the number we should use to target any hellacious decline in the bonds.  However, it shouldn't go unmentioned that such a lengthy and tightly constrained sideways move in this vehicle is most unusual -- a result, one supposes, of Fed T-bond purchases that for the time being are restraining the long end of the yield curve. The effort can only end badly, but so far there has been rather less strain than we might have expected.

We've analyzed the T-Bond bear market closely during the Wednesday tutorial sessions, but here's a picture for the tout section that can be archived. Because there is such clarity in the 117^22 target and the daily-chart pattern that produced it, we should confidently expect more weakness down to at least 117^22. Also, any rally to the midpoint pivot, 122^27, should be regarded as an opportunity to try shorting with a tight stop-loss. ________ UPDATE:  On second thought, we'll pass on any opportunities that may arise to short 122^27, since it's possibility such relative heights could be achieved simultaneously with the creation of a powerful impulse leg on the intraday charts.

We should require nothing less than a 123^02 print today before inferring that the two-day surge into week's end was more than a dying-cat bounce. A rally to that price would surpass a tiny (aka look-to-the-left) peak made on the way down last Tuesday, renewing and solidifying the bullish impulse thrust recorded on Friday. Bears had better dive for cover if this occurs, since the squeeze will only just be starting.

Yesterday's nasty selloff exceeded a clear Hidden Pivot midpoint support at 130^28 by 12 ticks, implying there is more downside to come over the near term.  The 'd' sibling of that number is 128^25, which we'll use for now as a minimum objective. (We should also allow for a bounce from 129^28, a Hidden Pivot support of less clarity.) If the futures do indeed fall to 128^25, it would refresh the downtrend on the daily chart, with bearish implications for weeks to come if not longer.

The futures would have to fall all the way to 127^23 to cast serious doubt on the intraday charts and the long-term bullish case, but for now it'll take only the breach of a midpoint support at 131^27 to imply the bears still rule the minor cycle.  A precise bounce there followed by a failure of the support would imply more downside over the near term to as low as 130^06.

Bulls appear to be back in charge with yesterday's thrust above an important peak at 135^07 recorded in August.  It would take a plunge all the way down to 131^20 to negate the bullish implications of this achievement. Most immediately, the nearest Hidden Pivot target lies at 136^00 and comes from the daily chart, where A=129^11 (9/17).

The futures topped last week a single tick beneath an important rally target at 133^23 given here earlier this month. Just one more tick would have implied the move is quite powerful, since it would have exceeded a visually obscure chunk of supply deposited September 2 on the way down. However, the rally that occurred will suffice to turn the daily chart bullish for the first time since mid-August, since it exceeded the requisite two prior peaks (one of them internal, the other external).  Now, ideally, we should see a 1^03-point "booster" rally from anywhere north of 131^00 to signal the next leg up. It could eventually go as high as 136^00.  ______ UPDATE (2:11 p.m. EDT): The predicted booster rally has come this morning off a 131^21 low, triggering a "buy" signal at 132^24.  Critical resistance lies at 133^27, the Hidden Pivot midpoint of the pattern, but if the futures can close above that number for two straight days, I'd infer they're on their way up to 136^00.

An against-the-grain projection of a bullish turn in the bonds is looking better with each passing day -- particularly yesterday, which gave us an ostensible flight-to-safety that sought refuge in bonds, though most surely not in the dollar. Go figure.  We won't try to parse the logic of it; instead, we'll continue to monitor the futures' progress toward a 133^23 threshold. Its attainment, as I noted here earlier, would clinch the bull trend for the foreseeable future, kicking the larger intraday charts into bullish high gear.

I've already touted the prospect of a bullish turn based on the failure of the most recent down-leg to reach a Hidden Pivot target.  The bullish potential has yet to be actualized, however, and would require a print at 133^23 this week to clinch a reversal of at least intermediate-term importance.