What’s Next?
With only 265 views as of this post, you would expect news like this to be everywhere.
Not willing to take a data point of only one, putting in the question of TLT short interest, yields this, link here.
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The Danger Point®, trade mark: No. 6,505,279
Bear Market Bounces
Home builders, and home improvement stores (HD, LOW), were up across the board on a policy announcement to support the housing sector.
Of the top three (market cap) builders, DHI, LEN, PHM, Lennar (LEN) has the weakest price action as we’ll see below.
On this site, we’re interested first, in the strategic position of the market; then, second, the tactical opportunity for a directional move.
Thirdly, is the focus part. There’s no ‘diversification’ but a zeroing into what price action says maybe the best opportunity (not advice, not a recommendation).
Strategic Position
The ‘Residential Construction’ sector topped-out way back in October, of 2024.
As of Friday’s close, even ending the week +10.2% higher, it’s still down (from all-time highs) -18.29%
Lennar Corp LEN, Quarterly
Looking at the long-term view.
The chart says it all.
Lennar looks ready for ‘implosion’ (not advice, not a recommendation).
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Is This It?
If there’s trouble, high yield bonds typically break down (rates higher) early in the cycle (not advice, not a recommendation).
When looking at the chart of ETF sector fund HYG, that’s what we have.
A rising, terminating wedge, then break to the downside.
High Yield, HYG, Daily
The magenta arrow shows pre-market trading (as of 7:55 a.m., EST), significantly lower.
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In The Aggregate
Whether or not we’re at the ‘anxiety’ point shown on the chart, is yet to be seen.
Markets are open this coming Monday, except for bonds, adding to the weekend angst.
Reviewing The (past) Week
Posts over last week, even the weeks before, showed from a Wyckoff perspective, something was about to happen.
Cadence Design … Reversal Ready, link here.
When The Bonds Spike, link here.
Wells Fargo Top … 86.66, link here.
Biotech (short) Set-Up, link here.
Top of The Dow, link here.
In retrospect and in aggregate, it’s now obvious something was amiss.
The ‘Art’ of Wyckoff
Wyckoff technique is more art than science, more intuitive than calculated, more ephemeral than certain.
We’ll get into what happens when logic overrides that art, in the next update; Nat-Gas UNG.
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The Danger Point®, trade mark: No. 6,505,279
Kickoff Move?
Does the TLT bond reversal, signal the kick-off for the markets?
In one of Ed Dowd’s many interviews, he said to watch the bond market for clues to when the rest of the market(s) could reverse.
The chart of long bond proxy TLT, shows us we’ve just had a wedge breakout and possibly a test.
Long Bonds TLT, Daily Close
If it’s a sustainable reversal, expectation is for the upside to continue (not advice, not a recommendation).
Of course, that also means capital is (potentially) moving away from equities; so far, doing it under the radar.
Until there’s a big break.
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The Danger Point®, trade mark: No. 6,505,279
Bonds & The Economy
Not getting much attention in the media yet, is what looks like a slow (nascent), upside reversal, of long-bonds.
Here’s an excellent description of what’s going on with the yield curve, link here.
However, there’s one potential error (depending on data used), in the link above, the job market.
Real unemployment numbers can be found here.
It says, we’re already at ‘depression era’ levels of 25% unemployment.
If anyone’s skeptical of alternate numbers, the official numbers have already been proven to be ‘in-question’.
One of the best examples of ‘official’ data, or lack thereof, is this report.
What’s a million jobs or so, between friends. 🙂
With mass layoffs starting, also, here and here, that 25% number above, is likely to increase significantly.
We can even add some anecdotal evidence, link here.
Strategy, Tactics, Focus
The price action of the market itself, is telling us where to go for opportunity.
Upside may still be there, if one wants to position in the A.I. bubble (not advice, not a recommendation).
However, for over eighteen months, this site’s been profitable only positioning to the short-side (UNG, the exception) and sees no reason to join the crowd buying into the A.I. mania (not advice not a recommendation).
The current focus is on WMT, a sleeper, not-doing-much, for years, that may be about to get interesting.
Currently short as WMT-25-03, with stop at last week’s high (not advice, not a recommendation).
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The Danger Point®, trade mark: No. 6,505,279
And Losing Altitude
If Boeing can’t frame airplanes in a timely and safe manner, it doesn’t matter how many orders are on the books.
Record order for Boeing, link here.
Add to that, the debt, just months ago, one notch above junk, link here.
Then, add to that, links here and here, interest rates may be moving higher as we speak. All of which, could put the bond issuance plan (see ‘junk’ link, above) at risk.
One more thing; Boeing has no P/E, and no yield.
You can’t make this up. 🙂
Boeing BA, Weekly
Note, repeating pattern: Spring-to-Up-Thrust, link here.
The sidebar shows already short BA, as trade BA-25-01, with stop at today’s final high or last Friday’s high, whichever comes first (not advice, not a recommendation).
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The Danger Point®, trade mark: No. 6,505,279
USA, Credit Rating Downgrade
Providing fuel to the interest rate fire of yesterday’s post, we have this and this. Website link here.
Adding to that, is the ‘big picture’ on US debt, i.e., it’s “unsustainable”, link here.
The strategy on the debt, is to have the situation (known) in the background; so, when things really implode, one is not caught ‘off guard’ (not advice, not a recommendation).
For example, what’s going to happen to ‘rate’ related commerce (like auto sales) if interest rates launch higher?
Short Covering
Short covering on a mass scale is not a bull market phenomenon.
In the past week or so, we’ve had another near record amount of buying, links here and here.
All Quiet
As of this post (7:45 p.m., EST), the markets are holding steady.
The only position open, is short Carvana CVNA-25-02, with a stop, nearly hit on Friday, at 304.61 (not advice, not a recommendation).
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The Danger Point®, trade mark: No. 6,505,279
TLT … ‘What Do You See?’
With TLT, poised to break lower (rates higher), make sure you’ve got your popcorn ready; the show is about to begin. 🙂
The next Fed meeting is one month away. A lot can happen before then.
Of course, by some unforeseen event, bonds could recover and move higher with rates lower. Anything can happen.
However, when looking at the long-term chart of TLT, a breakdown appears imminent (not advice, not a recommendation).
Long Bonds TLT, Monthly
Back in the day, David Weis (see About), never asked me what I thought, or about the next earnings release, or any other non-productive pursuit.
No, the question was always: “What do you see?”
If bonds break lower and rates go (significantly) higher, just think of the chaos.
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The Danger Point®, trade mark: No. 6,505,279
Largest Downside Thrust … Ever
In the past few weeks, it seems like the markets have been whacked with a lot of, ‘the largest, ever’.
Trading in bonds, specifically TLT, is no exception.
While the media and pundits alike, deflect with ‘who’s doing the selling’ (hint: it’s not important), we’re going to look at the harder question of ‘what does it mean?’
Kick-Off, or Capitulation
Borrowing from research and writings of Wyckoff, Weis, and Prechter, when we get such a huge thrust downward (chart below), it’s typically one of two events:
A massive kick-off to much lower prices or a capitulation that washes-out the weak hands.
A bond upside reversal (rates lower) is a common sign of nearing or active economic downturn (not advice, not a recommendation).
In this interview with Greg Hunter, Ed Dowd covers the topic … the expectation for the reversal. However, that interview, was before the massive thrust lower.
Long Bond Proxy, TLT, Weekly
For years, it’s been one failed upside (reversal) after another.
Is this time, different?
The right side (magenta arrows) shows unprecedented thrust and volume.
So far, there has been a weak recovery to 38.2%, retrace of the recent down-move.
If that retrace level holds, with bonds continuing lower (rates higher), it does not bode well for the ‘capitulation’ narrative.
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The Danger Point®, trade mark: No. 6,505,279
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