If there was any remaining hope for the economy, the next leg lower in bonds (with rates higher) should just about take care of it.
Of course, if one knows what’s likely to happen, then preparations can be made.
The breakdown in bonds is already underway and this morning’s pre-market action (as of 9:08 a.m., EST) is more of the same … down.
The daily chart of bond proxy TLT, shows the wedge and measured move. With that said, there’s no guarantee of bonds heading lower, just probabilities.
Also, if bonds go lower there’s nothing that says they can’t just keep going … with rates ever higher.
Bonds TLT, Daily
Of course, one does not have to sit idly by and watch their account(s) be decimated with persistent down moves.
Leveraged inverse bond fund TBT, has been around a long time; it’s a viable tool to either hedge positions or trade outright (not advice, not a recommendation).
Leveraged TLT, Inverse: TBT, Daily
Within the past two weeks, TBT, is up over +11%, which is quite respectable for a bond fund.
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 majority of the indices are at their right-side channel lines.
We’ll cover semiconductor SOXX, and QQQs, below. However, biotech IBB, and SPBIO, are in similar positions.
From a calendar and data standpoint, there’ll be plenty that could be used as an ‘excuse’ for market moves but let’s ignore the (intended) distractions and take a look at what the market is saying about itself.
First up, is the semiconductor index, the SOXX.
Semiconductor’s, SOXX, Daily
The chart has Fibonacci retrace levels shown. Price action has retraced to 38.2% and stalled.
But wait, there’s more.
Putting in a trading channel, we could be at a reversal point.
Note the upward thrust energy (‘Force’) has dissipated.
the NASDAQ is in a similar situation but weaker from a retrace standpoint.
NASDAQ, QQQ, Daily
Looking at the monthly chart for the Q’s (not shown), it’s been a Fibonacci 13-months since all-time highs.
Force dissipation and ‘Contact Points’ are near identical to the SOXX.
Summary
Biotech IBB and SPBIO, are in similar positions. In fact, the overall markets appear poised for downside reversal.
As discussed in the last update, the bond market could be signaling danger ahead with its sharp upward reversal; now (potentially) entering its sixth week.
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 potential for a sustainable bond reversal was identified way back in mid-October.
Now, over a month later with bonds moving decisively higher, the ‘narratives‘ are out in force.
Those narratives revolve around ‘pivot me this, or ‘pivot me that‘, or an infinite number of the same variations.
The reality is, there’s not going to be any ‘pivot’.
Even if there was, as Michael Cowan reported weeks ago, the market keeps crashing anyway (not advice, not a recommendation).
With that in mind, a popular narrative is that bonds are higher because the Fed will lower rates when they see we’re in a ‘recession’.
Well, they won’t ever see a recession because we’ve skipped that part; going straight to collapse and economic depression. 🙂
Of course, as Jerimiah Babe puts it, Americans won’t do a thing to get ready until the last minute … most likely after the market is down 50%, or more.
Instead of the placating, proletariat calming narrative, it’s a recession; maybe bonds are moving in response to those in the know … something much worse may be ahead.
Could bonds be signaling, we’re close to a market rout?
Bonds, TLT, Weekly
We’re going to start with the original analysis, showing the potential for a sustained reversal.
From the October 16th, post.
A month or so, later.
As with the dollar analysis from years ago, a weekly bullish divergence as we see here, may result in a rally that lasts longer and goes farther than anyone expects.
Of course, the real question is ‘what does it mean?’
As Wyckoff said over a century ago, we won’t know the full reason for a move until it’s over.
One view of it however, different from the accepted narrative, we could be headed for some kind of disconnect; those in the know are shifting to ‘relative’ stability.
Moving on to other markets, we have the following:
Positioning
Not advice, not a recommendation.
The push higher in biotech SPBIO, discussed in the prior update did not materialize.
Instead, we got a new daily low, followed by some upward testing action.
A day-trade in LABD was opened and closed; then near the market close, opened again.
Details are as follows
LABD-22-12:
Entry @ 19.9134***: Stop @ 19.10***
Note: Positions may be increased, decreased, entered, or exited at any time.
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.
Of course, the already hammered bond market (TLT), got hammed some more.
It’s what happened next, and what’s happening today, that’s important.
That is, the sell-off was quickly reversed (to the upside) with that upside continuing this session.
The bond supply is being absorbed.
So, what does that mean?
It’s possible, the bounce, melt-up, squeeze or whatever one wants to call it could be over. There may already be a ‘flight to safety’ if there’s such a thing these days.
But let’s not hypothesize on what could be happening. The market itself (price action), tells us.
Bonds TLT, Daily
At about mid-session, this is where we are.
We’re right at the downtrend line.
The attempt to mover lower (yesterday), has been rejected.
As a result of today’s new daily high, the stop on position TMF-22-01, has been moved up (not advice, not a recommendation).
So, we’re now between the downtrend and the ‘rejection’; something’s likely to break.
Summary
The S&P (SPY) just posted an up-thrust reversal early this session and is still moving lower as of this post.
Keep in mind, all of this is happening before any Fed announcement … as if the market has already decided.
A quick note on biotech, SPBIO.
Position size has been increased in SPBIO, leveraged inverse LABD, as shown below (not advice, not a recommendation).
This sector remains at The Danger Point®
If the bounce really is over, biotech is likely to get hit the hardest.
Positions, Market Stance (courtesy only, not advice).
TMF-22-01:
Entry @ 7.166, Stop @ 6.77***
***, Indicates change
LABD-22-09***
Entry @ 19.88, 19.71***, Stop @ 18.69***
Note: Positions may be increased, decreased, entered, or exited at any time.
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.
Instead of upside follow-through, we had downside test and reversal.
Gold:
GLD, closes lower and is now down seven consecutive months … a record for the tracking ETF.
Biotech
Index SPBIO, has been attempting to move higher, with it posting into an up-thrust last week.
Today it couldn’t hold the upside; now looking like a nascent reversal.
Note: Position changes at the bottom of this update.
The test and reversal in bonds (TLT) is obvious and there’s no open position in GLD.
So, we’ll focus on biotech.
Biotech ($SPSIBI, SPBIO) Daily
The zoom area of the chart shows price action just can’t seem to get above resistance (blue line).
Successive attempts were made throughout today’s session to go higher, but it didn’t happen.
Getting in closer on the hourly chart, we see the apparent upside failure during the last hour of trading.
Biotech SPBIO, Hourly
There is no doubt where at The Danger Point®
Right about mid-session, a short position was opened via LABD (not advice, not a recommendation) as LABD-22-09.
Summary
Today’s expectation for bonds was a follow-through to the upside … it didn’t happen.
In response, the initial TMF-22-01, position was closed with the secondary remaining open (not advice, not a recommendation).
Meanwhile, biotech SPBIO, was having its own problems; that is, being in up-thrust condition and not being able to make a new daily high. i.e., The Danger Point®
Positions, Market Stance (courtesy only, not advice).
TMF-22-01:
Entry @ 6.705, 7.166, Stop @ 6.68
Partial Exit @ 7.053***
***, Indicates change
LABD-22-09***
Entry @ 19.88***, Stop @ 18.94***
Note: Positions may be increased, decreased, entered, or exited at any time.
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.
It’s either a short-term trade or a strategic reversal.
On the strategic reversal side is this just out from ZeroHedge.
‘Inflation’ may have peaked; where have we heard that before.
However, the charts presented in that link, do show we’re at an extreme.
If we look at the TLT, price action itself, which is impulsive down, we’ll go with the short-term first (not advice, not a recommendation).
With that, Friday may have been the ‘test’ from our capitulation model.
The weekly chart of bonds TLT, shows the anticipated up-tick in MACD, as well as the measured move target from the terminating wedge.
Long Bond, TLT, Weekly
Note, the wedge has not (yet) broken to the upside … we’re still at The Danger Point®, where the trade could fail.
If we look at the daily chart, probabilities point higher.
Long Bond, TLT, Daily
If this past Friday was the ‘test’ of the move, the retrace was a very weak Fibonacci 23.6%.
A new daily high in the next session(s), will help to confirm we’re headed higher.
Positions, Market Stance (courtesy only, not advice).
TMF-22-01:
Entry @ 6.705, 7.166***, Stop @ 6.68
***, Indicates change
Note: Positions may be increased, decreased, entered, or exited at any time.
Summary
If bonds continue to move higher, with rates heading lower, what’s going to happen to real estate, IYR ?
The wheels of the real estate crash have already been set in motion. If bonds rise, rates fall and IYR moves higher, there are specific targets to watch for short opportunities.
We’ll discuss those targets and more, in the next ‘The Market Set-Up … This Week’
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.
There’s nothing wrong with being wrong … it’s being wrong and staying wrong, that’s the problem.
What appears to be correct so far, is the upside reversal in the bond market.
We’re going to look at another capitulation to get some idea of what to expect if indeed bonds have reversed.
This past April, the gold market (GLD) capitulated on the upside. At the time, it was quickly and correctly identified as a ‘changing of hands’.
Gold (GLD) Capitulation
From a strategic standpoint, gold has not looked back.
Down around 20% (although slightly higher in today’s pre-market), there seems to be no major catalyst to get a similar capitulation reversal.
Using that reversal model and looking at bonds, we’ll use the 3X Leveraged Fund TMF, as the example.
Leveraged funds accentuate market moves, sometimes giving a clearer picture.
Bonds (TLT) 3X Leveraged Bull Fund, TMF
As far as what might be behind a (sustainable) bond reversal, we have this report from Steven Van Metre.
Using The ‘Model’
Note in the GLD reversal, prices went lower for a while and then came back to ‘test’.
Using that, we can expect TLT, TMF, price action to rise for some (unknown) period of time; then come back to ‘test’, before continuing higher (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.
The Danger Point® 