TBT (inverse TLT) pulling back to breakout support

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The breakout of the base in TBT             (which is a breakdown of the top in TLT             ) set up a rally to the projected target created from the measurement of the first green triangle you see on the chart. This breakout pattern could very well go another measured move from the breakout level projecting up to the "MAX TARGET" within 23 days from the breakout of the range labeled "DAY 1". The small green rectangles are the previous day's range subtracted from the previous day's close. "DAY 1" is the first day where the market jumped away from the price cluster of 14-23 days and began the trend. Realize this is a leveraged instrument and it moves more than the underlying TLT             . It would be roughly the same to short the TLT             , but you would need more capital to set up the trade.

I believe that next week is when this trend has the chance to really take off. The reason being that it will be the start of a new quarter and that is when new decisions get made and they get made pretty aggressively especially at the beginning of the quarter. Bonds have had a bad quarter, but very likely next quarter they will have a far worse quarter as capital shifts out of bonds and into equities.

By: Technical Tim
11:17AM March 28, 2012
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can u update this chart for Aug?
TBT moving along very nicely here on the FOMC announcement. Time for bonds to start yielding a "real return". Which means much lower bond prices ahead.
Technical Tim,
I think your analysis is excellent and also noticed the recent alert about TLT/TBT via market coverage. The only minor dispute I have is this notion that an anticipated fluctuation in the bond market is going to generate this 'redirection' of overwhelming amounts of capital into the equities markets to recharge another 1-3mo rally. I disagree with this & might even consider it a pipe dream for the short term forecast. Without going into technical illustrations, I firmly believe that without another QE renewal & with Europe still solving virtually nothing via liquidity/collateral methods, I'll expect to see a short term dollar rally & obviously since Euro is polarized it will perform the inverse pattern of the dollar trend. On that currency basis, I believe the equity markets have run about as much as they possibly can & put in a resistance level which will prevent further advances and whenever the US dollar has made strides, the equity markets suffer in correlation to currencies.

Just my thoughts.
timwest vin_noto
Thanks Vin. Optimism about equities is quite high and VIX is way too low for me to be comfortable with equity index levels, but there are corporate buybacks running at $400 Billion a year and there is this "wind at our backs" from funds that are likely making their way quietly back into equities from bloated bond positions. The commodities sector is starting to kick investors in the pants with losses and the US Dollar is likely to benefit as the US is a decent place to hide from Europe, Japan and China. As for bonds and what will power their trend down (and TBT up) I am aware I have a very aggressive price forecast, but it is based on the level of confidence that we saw in bonds last year and how badly they underperformed in the first quarter. With the economy at least holding its own (treading water) and expectations generally signaling a stronger economy (auto sales up, employment up) and an election year (where republicans look like they are certain to take demonstrative control of the house and senate), and you have the bond market acting like people are reluctant to sell their "BIG WINNER" and good old Bill Gross was short all the way UP in the rally and is now LONG for the decline... it appears we are still set up for a big second quarter decline in bonds... A bigger decline than the 1st quarter. Inflation is greater than the bond market returns and yet investors are accepting all of the bond market's price volatility in exchange for nothing "real" at the end of the year.

I appreciate your comments and I do try to balance out the fundamentals with the technicals of price and sentiment to find low-risk entry points in any market. If you have a market at an extreme, feel free to point it out to me and we can explore it together here at Tradingview.

Many thanks - Tim
vin_noto timwest
I understand. I wasn't attempting to be argumentative or a critic. I was simply pointing out as a warning for you not to be naive and believe in this common conjured up notion that lots of new money will be pouring into equities. Of course, I can be wrong but I'm actually looking out for you with my commentary. I believe the US markets are about to enter serious turbulance for mutilple reason due to European hysteria & now flipped to diminished interest for investors. I predicted a 3mo rally in the wake of a Greece 'resolution' which is not quite finalized with elections on the horizon. I'm just suggesting to you a warning that a serious short term correction will probably take stage within the currency sector & impact markets due to a lack of European economic optimism & a Bernanke balk on QE3. It's only a matter of time before the currencies unravel and head towards more realistic values.

This is my first visit to this site so maybe I shouldn't be taking the discussion from chart analysis to overall market/currency forecasts. However, your first statement about the VIX seems like you're already concerned about a major market pullback. However, it's kind of a contrast/paradox if you're saying you're concerned the VIX is way to low and headed north with a market retrace...and then in another statement you're bullish the market overall per bond market fund moves to equities for another recharged bull run building on Jan-Mar 2012 uptrend. I agree with your chart analysis 100%. Just not the common opinion which is stated on CNBC that bond market money is headed for equities. Not necessarily safe to assume this will be a certainty.

timwest vin_noto
Thanks Vin. I didn't feel criticized by you and was happy to reply to your insights and perspectives. I appreciate your comments and my reply was outlining the additional thoughts I wrestle with. I like to make a list of bullish and bearish factors. As for "conjuring" up notions, fortunately for me, I avoid CNBC and their tantrum-like behavior and choose to read market news, advisors perspectives and listen to BloombergTV during the day. I'm constantly looking for over-reactions and flock-mentality. I definitely don't like to be in with the "flock". We can keep this site about technicals, stop losses, targets, trendlines, but I do like news, fundamentals, sentiment and more to help me find my trades. Thanks for any help you can offer. Cheers. Tim
vin_noto timwest
Ok good to hear your sentiments. Yes, CNBC almost pointless to follow but I do listen to them but I'm starting to tune them out more & more. Someone like Jim Cramer does not factor any equity shorting into his show for advice to investors which is absurd. He keeps it simple & just sell sell sells the buying in routine side which is only part of the market equation. One of the only analyts I tune for advise is senior analyst for Oppenheimer, Carter Worth. And I also listen up at 5pm for fast money and favorite is options action & currencies from 5pm which is only on Fridays. They just had Carter Worth on an hour ago & I missed his S&P assessment but caught the conclusion he ended with which was the market is very much due for a pullback & the longer equities get runup higher ...the harder the fall may turn out as a result of the delay.
Good chatting with ya.
vin_noto timwest
Oh one more thing regarding Carter Worth's excellent analysis - He's been on twice in the last month just to evaluate the gold chart trend & forecast. He said it appears that gold is broken and the outlook is not promising. There has not been a major pullback yet for gold but I still expect to see one real soon. I already made the same diagnosis & been short gold since December week#1, patiently waiting for a potential payoff.
vin_noto vin_noto
Got it...here is C.Worth chart evaluation ... http://video.cnbc.com/gallery/?video=3000080741&play=1
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