I recently posted about expected downside for the bond market, based on technicals.
As long as we're looking at bonds, why not look at treasuries.
The technicals for TLT are in a little more of a "grey area" technically, than corporate bonds. The two scenarios I can see for the wave pattern have very different outcomes. Scenario 1 points to lower prices after small counter-trend rallies, and a break of the rising channel going back to December of 2013. Scenario 2 calls for new highs from here, and a general resumption of the rising channel.
My bias leans toward scenario 1 for 2 reasons.
1. Prices have yet to test the lower end of a price channel containing the ABC/WXY corrective pattern from the January highs. As I pointed out in the linked post about bounds, corrective patterns have a tendency to channel.
2. In a WXY pattern, W and Y will tend toward equality, and so far the Y-Wave has fallen short of the price projection at 117.43.
In summary, many traders and investors are looking for a major bear market here, which would drive up the price of treasuries as investors seek safety. I've been "cautiously" taking the other side of that view, with a view of stocks needing a healthy correction.
Treasuries may bounce a bit here, as uncertainties develop around some stock market selling, but I expect that bounce to be a counter-trend rally, rather than a continued bull market in treasuries.
As long as we're looking at bonds, why not look at treasuries.
The technicals for TLT are in a little more of a "grey area" technically, than corporate bonds. The two scenarios I can see for the wave pattern have very different outcomes. Scenario 1 points to lower prices after small counter-trend rallies, and a break of the rising channel going back to December of 2013. Scenario 2 calls for new highs from here, and a general resumption of the rising channel.
My bias leans toward scenario 1 for 2 reasons.
1. Prices have yet to test the lower end of a price channel containing the ABC/WXY corrective pattern from the January highs. As I pointed out in the linked post about bounds, corrective patterns have a tendency to channel.
2. In a WXY pattern, W and Y will tend toward equality, and so far the Y-Wave has fallen short of the price projection at 117.43.
In summary, many traders and investors are looking for a major bear market here, which would drive up the price of treasuries as investors seek safety. I've been "cautiously" taking the other side of that view, with a view of stocks needing a healthy correction.
In particular, you should spend no time at all thinking about those rosy scenarios in which the market goes your way, since in those situations, there's nothing more for you to do. - William Eckhardt
