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.
With the reversal now obvious (since the Fed announcement, September 18th), we have the usual suspects putting out ‘content’ (here and here) letting you know what’s already happened.
In Prechter’s book, The Wave Principle of Human Social Behavior, he states, being part of the herd, is hard-wired into the brain.
Therefore, it takes diligent, consistent effort, to go against the mindless (limbic brain) herd if you’re going to make an objective observation.
So, let’s do just that, taking an objective look at the potential effects of the bond reversal.
Bonds (TLT proxy) began its reversal, rates higher, the day before the last Fed announcement.
The IYR, reached its high that Wednesday, 9/18/24.
Real Estate IYR, Weekly
It’s been nearly three years since the all-time high in December, of 2021. The wedge shown below has been just over a year in the making.
The reversal action of the past few weeks can be seen in the ‘Throw-Over’ area of the chart.
If the wedge has been identified correctly, price action has now entered back into that formation.
Positioning
This post highlighted a short position was on the horizon.
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.
As the chart shows, real estate and bonds (interest rates) have been well correlated for over three years.
There are times, when that correlation gets ‘spread’; one market goes one way, while the other market goes … well, the ‘other’ way.
That time appears to be now.
Long Bonds TLT & Real Estate IYR, Daily Close
Note how the ‘spread’ eventually gets closed.
Note: The first spread on the left part of the chart took several months to close (completed in late July 2023).
The correlation remained near exact until about January 2024, where it began to diverge again.
Now, we’re spread with bonds heading lower (rates higher) helped along with the latest ‘jobs data‘.
Positioning
If time permits, we’ll go into price action posted yesterday and how this series of two IYR, price bars, yesterday, the day before, are (almost) exactly like DE (John Deere) price action shown by Daivd Weis on his video … except taking it from a short perspective.
Current position DRV-24-05, remains intact; stop now moved tentatively to the DRV session low for today (not advice, not a recommendation).
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.
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.
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.
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.
The market gives us clues, we just need to know where to look.
Even before last Wednesday’s Fed announcement, bonds were already heading lower (rates higher), reversing the day before.
Tuesday through Friday had successive lower closes in long bonds, TLT.
All of that, to wind up the week ‘outside down’, or posting a ‘key reversal’.
Those don’t happen often.
Long Bonds TLT, Weekly
The last outside-down weekly bar (in an uptrend) was over two years ago.
Bond prices declined 32%, before recovering.
In what seems to be a recurring theme, Force Index (like XBI, NVDA) is telling us there’s little-to-no-energy left to move prices higher (rates lower).
Of course, anything can happen, and reversals can themselves be reversed.
However, if bonds continue lower, it’s probably time to get the popcorn ready to see how the media paints the picture.
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.
It was just four days ago, the mainstream (in this report) was telling us, be on the lookout for a biotech breakout.
That was then … here we are now.
Price action in XBI, attempted to break higher at the Fed announcement.
That move appeared to fail by the end of Wednesday’s session … then came Thursday’s launch higher.
However, that move may have failed as well.
Biotech XBI, Hourly
At this point, we’ve posted a Wyckoff Up-Trust (reversal).
If this is a significant reversal, we’re still in the very early stages; at The Danger Point®
Positioning
As can be seen in the sidebar, a short position was opened (yesterday), LABD-24-18.
That position has been increased in size during this session (not advice, not a recommendation).
The SOXX (short) Exit.
Yesterday, SOXS-24-16, was exited with an -11.6%, hit; so, everyone can see the effects of breaking one’s discipline (not respecting the position stop).
Don’t force the trade … sounds so simple.
Getting back to work, the XBI false breakout was recognized early and the trade opened.
Today, so far, we have follow-through, confirming the reversal.
Bonds Continue Lower
Bonds, TLT, are currently posting an outside-down (reversal) on the weekly timeframe.
The last time there was an outside-down on the weekly, was over two-years ago; week of August 5th, 2022.
After that, bonds declined a whopping 32% before (slightly) recovering.
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.
Just like that, bonds reverse; rates higher (not advice, not a recommendation).
Now, it gets interesting.
The mainstream’s already covering; within hours (if not minutes) of the Fed’s move, saying if the economy ‘improves’ rates will have to move back higher; you can’t make this stuff up.
Rates are already ratcheting higher (chart below).
Long Bonds TLT, Daily Close
The pattern is clear; terminating wedge (not advice not a recommendation).
Pre-market action (as of 8:42 a.m., EST) has TLT, trading down (rates higher) – 0.84 pts or – 0.88%, giving further weight to potential (continued) downside reversal.
Fed Calendar
Looking at the Fed calendar, link here, it’s a very interesting date; ‘the day after’ November 5th.
Let’s see if the ‘rate cut’ is immediately reversed (not advice, not a recommendation).
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.
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.
The Danger Point® 