Category Archives: Bonds

Long Bond Short: Largest, Ever

October 24, 2020 By in Bonds, TLT 2 Comments

As reported by Steven Van Metre, here, the long bond speculators have an historic, all-time massive short position. 

He shows their net position is four standard deviations away from norm.  The chart he references can also be found at Zero Hedge, here.

So, just how significant is that?

The bell curve chart shows the typical 3-standard deviations cover 99.97% of all data observations. 

We may as well say that four standard deviations cover all data:  100%.

The speculators are so convinced bond price are going lower (interest rates up), the have amassed a huge position.

Now, it gets interesting. 

The chart below of TLT (long bond), has bonds currently declining in a measured move that projects to the 152.5-level.  Feeding into the speculator’s positions (giving them a gain thus far).

We also have a Fibonacci time sequence in effect for TLT.

It that’s met in the coming week (and we get a new low), it will be a Fibonacci 34 weeks from the high set during the week of March 13th.

If TLT penetrates the low set on Week 13, and depending on how far below support that penetration goes, it will set up a Wyckoff spring condition … setting up the TLT to move higher.

Moving higher is against the speculator’s positions.  They are short and the index would be moving up.

It could potentially be the largest short-squeeze of all time.

If that happens, think about what will happen to the markets, the dollar and the precious metals markets.

Stay tuned.

Charts by StockCharts

Note:  Posts on this site are for education purposes only.  They provide one firm’s insight on the markets.  Not investment advice.  See additional disclaimer here.

Theory vs. Action

September 5, 2020 By in Bonds, Interest Rates, S&P 500, TNX

Successful market speculators and traders, are not intellectuals.  There’s a difference between smart and savvy.

This is why scientific professionals such as doctors and engineers (author’s empirical opinion), are some of if not the worst market losers.

That statement is backed up by many sources, just two of which are below:

In Dr. Alexander’s book Come Into My Trading Room, he gives a brief reference to a Cybernetics PhD., market trader that had to ‘overcome’ his intellectual superiority to be successful.

In Market Wizards, Ed Seykota discussed a need to use his MIT Engineering degree (his intellect) in ways that won’t hurt him too badly in the marketplace.

There are now two theories on the U.S. bond market (links below) and we’ve been monitoring that market closely.  The bond action, TNX, looks like it’s about to break out with rates higher.

On Friday, we saw the market and bonds move lower together. 

The next meltdown may be a simultaneous collapse of the market and bonds.

The effect of such a move would be to wipe out retirees, the middle class and wealth management firms all at the same time.

Bond theory says, bonds will remain under control and interest rates low.  Bond action says, bonds will be sold off with rates rising.

Going to price action of the 10-year, it’s critical juncture status from the last post has not changed.  In fact, price action shows bonds even more tenuous.

Professional trading is based on price action, not theory.

At this juncture, going short (selling) the bond market (not advice) appears to be the lower risk position.

The past week has the press and public all aghast at a minor (percentage wise) blip lower. 

We’re probably on the last bubble for this cycle.  The markets could ‘air-pocket’ into several gaps lower; say, 25% – 50%, overnight.

Be Prepared

Charts by StockCharts

Note:  Posts on this site are for education purposes only.  They provide one firm’s insight on the markets.  Not investment advice.  See additional disclaimer here.

Hulking Shell

August 27, 2020 By in 1987, Biotech, BIS, Bonds, IBB, TBT

That’s what the average investor’s portfolio could be a scant two months from now if the analysis is correct.

Fotosearch_k7478570-BW-border

That is; markets are stretched to obscene levels, bonds breaking down, rates rising; the nearest corollary is August, 1987.

From a timing standpoint, it could be important.  That August was a Fibonacci 34 (-1) years ago.  Well within the margin of error.

Yesterday’s trade set-up (not a recommendation) was timed perfectly.

Today, that trade (if entered) would be up by about 2.8% at current levels.  The stop now gets moved to 15.54, today’s low.  Of course, this is for illustration purposes only.

For a bond trade, 2.8% is significant for a single day.  It looks like much higher rates are ahead.

Meanwhile, biotech (IBB) has given yet another sell, sell-short signal.  IBB briefly penetrated yesterday’s high of 133.39, and is reversing.

If price action continues lower, it’s a bull trap; a false breakout.

We’re actively short the sector via BIS (not a recommendation).

2020-08-27_11-53-45-TBT-Daily-5-bar-notes

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Note:  Posts on this site are for education purposes only.  They provide one firm’s insight on the markets.  Not investment advice.  See additional disclaimer here.

Bonds: Back To Breakout

August 26, 2020 By in 1987, Bonds, Interest Rates, TBT, TMV 2 Comments

shutterstock_1713590722The bond market is key.

If interest rates breakout from this point, we’ve got a set-up that mimics August 1987, on steroids.

The chart below shows ten-year interest (rates up, bonds down) is back at the trend-line.

It’s before the open and pre-market (as of this post) also has the ten-year (and the TLT) trading lower.

Two well known and liquid inverse funds for bonds are TBT (2X-inverse) and TMV (3X-inverse).

A price action insert of TBT, is shown on the TNX chart.

There’s a potential for today’s price action to make a new daily high.

If so, a possible trade (not a recommendation) would be an entry at the last session high, 15.74, with the stop at the last session low, 15.50.

If such a position could be opened, the risk therefore is 0.24-pts, barring any catastrophic adverse move.

2020-08-25_23-03-54-TNX-Daily-3-bar-notes

 

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Note:  Posts on this site are for education purposes only.  They provide one firm’s insight on the markets.  Not investment advice.  See additional disclaimer here.

Is Corn The Catalyst?

August 20, 2020 By in Banking, Bonds, Corn, Gold & Silver, S&P 500 2 Comments

Bonds, biotech, the banks; or is it corn that’s the catalyst?

Everyone’s focused on the markets, the S&P 500.

Fotosearch_k8956751Meanwhile, back at the farm (literally), the food supply is undergoing controlled demolition.

If the supply chain continues to be restricted with prices rising ever higher, the silver and gold ‘stackers’, may have to liquidate their hoard just to survive.

Getting back to corn; the technical position of the ETF, CORN was highlighted yesterday in this post.

Now, with about an hour before market close, CORN has posted a 38% retrace and reversal ( if close is at or above current levels).

On top of that, it may be too early but maybe not.  CORN is now trending upward at over 400%, annualized.

One day, does not a trend make.  Then again, wouldn’t it be nice to know early on of the possibility?

2020-08-20_13-42-53-CORN-Daily-4-bar-notes

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Note:  Posts on this site are for education purposes only.  They provide one firm’s insight on the markets.  Not investment advice.  See additional disclaimer here.

Shorting The Bond Market

August 17, 2020 By in 1987, Biotech, Bonds, Interest Rates, Lumber, Real Estate, S&P 500

Who goes first?  Do bonds break to the downside, rates up, market reverses lower into a potential crash; a-la October 1987?

Or, does the market (S&P 500) peak and reverse with a flight to safety (bonds) that mitigates or negates a sharp rise in rates.

Fotosearch_k6354877Maybe it’s stocks and bonds going lower together.  No safe havens.  Is it possible?

Early this session, the ten-year rate (inverse of bonds), is hovering just below the trend-line shown in the last post.

The bond bull market has lasted forty years.  Since 1980.  Obviously, at some point, it’s over.

With long bonds (10-yr, 20-yr) hovering near a breakout to lower levels, all it would take is some kind of ‘event’ to tip the scales.

Remember that Prechter  (no matter what you think of him) said years ago, the market leads the news … not the other way around.  It’s a complete mind-shift to understand that market position, price action, actually set the conditions for news events.

The market does not ‘react’ to the news, it ‘creates’ the news itself.  So, the bond market may be about to create an event.

With that in mind, inverse fund TBT attempts to give exposure to twice the downside of the 20-year bond.

In a nutshell, if the long bond moves lower, TBT moves higher at approximately twice the percentage amount.

The chart of TBT is below and it looks very similar to the $TNX chart in the prior update.  Looking closely, one can see the downward bias errors.  With each move lower in the $TNX, the TBT moves lower still.

It’s common with all inverse funds.

2020-08-17_9-07-32-TBT-Daily-3-bar-notesEffectively trading TBT requires a sustained down move in the corresponding market (to mitigate the down-bias).  The latest example shows bonds ready to break lower with rates ($TNX) moving higher.

TBT could be in a position for trade entry (not advice).

Additionally, if bonds break decisively lower, they have potential to stop dead what’s left of the economy:  Housing market, lumber market, building construction, and on.

Remember ‘the speck‘.  It’s all about the speck floating through the air.

On a separate topic and as a courtesy (not financial advice), the short position in biotech via BIS, was closed early this session as price action hit the pre-determined 8.15, stop.

Gain on the overall short position was about 5%.

 

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Note:  Posts on this site are for education purposes only.  They provide one firm’s insight on the markets.  Not investment advice.  See additional disclaimer here.

Bonds Critical

August 16, 2020 By in Bonds, Interest Rates, Lumber, Real Estate, S&P 500 1 Comment

The 10-year bond has reversed.  Rates are moving higher.

Fotosearch_k0005935-borderIf the chart pattern (below) is in effect, if price action moves according to the breakout forecast, real estate … along with lumber prices, as well as the entire economy could experience a series of dramatic ‘air pockets’ all-the-way-down.

Of course, all of this is because of a little ‘speck’ floating around in the air.

Rates are at the wedge trend-line and instead of a breakout upward (as expected), could reverse back lower.  Anything can happen.  The next week is likely to be very interesting.

2020-08-16_8-43-46-TNX-Daily-3-bar-notes

 

Charts by StockCharts

Note:  Posts on this site are for education purposes only.  They provide one firm’s insight on the markets.  Not investment advice.  See additional disclaimer here.

September, 1929

August 15, 2020 By in 1929, 1987, Bonds, S&P 500

The stock market peaked on September 3rd, 1929, the Tuesday after the Labor Day weekend.

Labor Day for 2020, is Monday, September 7th

The bond market has posted a double top and reversed.  Rates are moving up.

Now, the stock market is stretched, extended and rates are rising; similar to August 1987.

Antique-Ticker-borderThe problem is, it’s similar by an order of magnitude or more.

Remember in the most recent downturn, there were trading halts, brokerage server blow-ups and customer accounts going completely off-line.

In that situation, if someone is long and expecting to beat the herd on the way out, good luck.

The firm sponsoring these updates and analysis stopped trading the (equity) long side of the market years ago; recognizing at any moment, the entire system could break-down with any open positions effectively locked.

If there’s another large break with orders, positions, accounts ‘trapped’, for hours or possibly days; who wants to be on the long side of the market?

Random Notes

August 12, 2020 By in Bonds, Gold & Silver, IBB, Interest Rates, Lumber, MRNA

Notes for the day … not in any particular order.

Lumber futures:   Prices up over 180% in five months.

2020-08-12_11-40-37-notesInterest rates are rising.  10-yr rates up.  Similar set-up as August, 1987?

Frustration with the mindless herd growing.

Biotech testing yesterday’s move lower.

Moderna (MRNA) has formed a wedge and is near a downside breakout.

Drunk and ‘working’ from home.

Internet censorship:  Oppenheimer Ranch Project no longer monetized.

Silver and gold, future test of new lows?  At time stamp 2:58, Sajad hints at same ‘testing the lows’ scenario as was posted with Silver Up, Then Down on July 25th.

 

Note:  Posts on this site are for education purposes only.  They provide one firm’s insight on the markets.  Not investment advice.  See additional disclaimer here.