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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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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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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Well, Except for HOOD
Long bonds TLT, have launched higher four consecutive sessions; yields lower.
Two major brokers, Schwab and Interactive, appear to have tested (or, are testing) their Friday breakdown.
Robinhood bucked the trend, closing at all-time highs.
That puts HOOD, in potential Wyckoff ‘up-thrust’ (reversal) position (not advice, not a recommendation).
Note: The S&P did not post new highs. Last Friday’s all-time high, remains intact.
Charts to follow.
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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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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 Big Picture
If things don’t change soon, the wheels have come off the bond market (not advice, not a recommendation).
At this point, it’s common knowledge the (U.S. Treasury) bull market of forty-years, ended in March of 2020.
It’s been nothing but rates ratcheting higher, ever since.
Recession Reversal … Where?
However, a strange thing happened on the way to the anticipated bond reversal … typically, a long-time indicator of an impending recession.
Just weeks ago, during the market meltdown with the largest trading volume ever recorded, bonds did not respond as expected.
The Blip
During that wipe-out, bonds (TLT) blipped higher into a false breakout, a Wyckoff Up-Thrust, and have since collapsed on the largest weekly downside (thrust) energy and volume ever seen.
Next update, the charts.
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Reversal and Test
The last update on ProLogis link here, said we had ‘evidence of a struggle’.
That struggle made one more attempt to move higher, posted a new daily high, then reversed.
In the process, real estate IYR, reversed as well; bonds, TLT, closed lower for the week (rates higher).
That brings us back to ProLogis.
ProLogis PLD, Daily Close
The labels correspond to the following S: Spring, U: Up-Thrust, T: Test
With this type of set-up, the expectation is for PLD, to post lower right along with real estate (not advice, not a recommendation).
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Evidence of a Struggle
Insight from the masters, Wyckoff and Weis.
When at a (significant) trend reversal, we want to see ‘evidence of a struggle’.
Looking at ProLogis PLD (largest Cap and weight, in IYR), that’s exactly what we see.
Exhaustion and (potential) reversal.
ProLogis PLD, Daily
Between the two blue lines is a resistance zone.
Note how each subsequent day (after the magenta arrow) is losing energy … or is a series of energy losses.
With prior updates here, and here, probabilities suggest continued (PLD, IYR) downside or possible sideways action (not advice, not a recommendation),
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Rates, Back on The Rise
Yesterday, was the reversal set-up for real estate (not advice, not a recommendation).
Now, it’s bonds
The bond chart below shows TLT, in a near-perfect trading channel.
Long Bonds TLT, Weekly
In addition to the channel, there’s a Fibonacci time correlation.
Or course, this could be the week (or next) where bonds break out to the upside.
Anything can happen.
For now, price action remains in the down-channel.
The next item shows we’re potentially at some kind of transition point.
Retail, ‘All-In’
Behind the scenes, reports like this, tell us the ‘retail investor’, i.e., the least informed and least disciplined participant is literally, ‘all-in’ the market.
What could go wrong?
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The Danger Point®, trade mark: No. 6,505,279
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