Hulking Shell

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

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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

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

 

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.