Bond, Bear Trap … When ?

Let’s Pick A Date

Hovering right at support, the long bond (TLT) is threatening to break through to the downside.

The usual suspects are out (here and here) pontificating about how many rate hikes there’ll be this year or how the Fed’s ‘not doing enough’ to combat inflation.

By now, anybody with two basis-points rubbing together should know, the Fed’s not going to do anything for anyone except itself.

If you’re reading this and have not separated from the nonsense, predictive programming, and mass-psychosis that is the financial press, feel free to do so now.

Not that one has to ignore them altogether.

It’s ok to monitor what they’re doing but ‘ol Zig Ziglar probably stated it best when he said (paraphrasing):

‘I read the Bible and the newspaper every day. That way I know what both sides are up to’. 🙂

Incorporating that worldview into one’s analysis is a healthier, more sane approach than trusting government statistics or mainstream propaganda.

Of course, one also has to be able to strategize and read price action. That’s the hard part.

So, let’s take a look at what bonds (TLT) are doing; then come up with a potential reversal (to the upside) scenario.

Asset Confiscation

Wait !!!

Bonds up and rates down? How is that possible. Aren’t interest rates going up in 2022?

Well, it could happen.

However, there’re several behind the scenes agendas at work; not the least of which is asset confiscation of the middle-class: “You will own nothing”, right?

This confiscation scheme has been planned for so long, it’s even got a name: Neo Feudalism.

If market participants and ‘investors’ find themselves in yet another wipe-out, they’re going to flock to the supposed ‘safety’ of U.S. bonds (just like they did last time).

Couple that with a few potato-head executive orders saying the market’s too dangerous for the proletariat; only bonds can be purchased and voila!!!

Long Bonds, TLT

Will that scenario above, play out in 2022?

Of course, that’s unknown until it actually happens.

However, what we do have as shown in the weekly chart of TLT, is a potential bear trap setting up.

Price action finished this past week hovering just at support. The range narrowed and the volume declined slightly … in effect, validating that support.

We’ve got an FOMC meeting coming up with the usual suspects issuing a propaganda statement at 2:00 p.m., EST on the 26th.

What To Watch:

Between now and then, bond price action could re-write the entire script just as it did with the gold market set-up.

Back then, the original gold (GLD) breakout idea was tabled only to have it show up again a few weeks later.

Note: Gold (GLD) broke to the upside exactly at the (purple) circled area shown:

Time and location, identified in advance.

Of course, the markets are a fluid and fractal mechanism. We’re dealing with probabilities and strategy, not pure (one answer only) mathematics.

Anything can happen.

However, given all the above discussion, the chart of TLT shown, has a reasonable potential to trap the bears in a bullish reversal if it penetrates support.

What’s the most likely time for this to happen?

Well, that would be on or about 2:00 p.m., EST, January 26th (absolutely not advice, not a recommendation).

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.

The Danger Point®, trade mark: No. 6,505,279

Theory vs. Action

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.