Chart of the Day: Buy bonds wear diamondsRaoul Pal from Real Vision has been active in pushing the line "Buy bonds wear diamonds" as the two asset classes to buy in this market regime. Can't say I disagree since I published the "Preponderance of Evidence" series of ideas back in Oct'18.
TY1! is slowly and surely creeping along an intermediate uptrend line after bouncing off a multi-decade channel support. I have said it before and will say it again, this is the time to start thinking about return OF capital rather than return ON capital.
TY1! and TLT is the only 2 names I would BTFD in this market regime.
TY1!
Lines in the sand=> Here we can see TY1 futures forming a topping pattern and testing key support levels...
=> With smart money scared of inflation returning bonds continue to be sold. This may be marking the top for the Equity markets.
=> Expecting a very active quarter ahead as we reach the end of the road on QE in Europe and with yields continuing to rise in the US we are flirting with a major breakdown.
=> One to track for the months ahead... let's see how it plays out.
=> Good luck all
ES1!: Wedge Wedge Wedge for potential -10% Right, I have articulated previously on how I feel fundamentally about S&P500 earnings growth and think the anti-trade rhetoric is not going away till Nov mid-terms. ES1! is trading at the top of a mini-wedge tucked within a medium term wedge. Drawing on my Dr Suess instincts to try to explain this:
Wedge 1 is mini wedge which I believe is a continuation pattern from the short-term peak on 14 June
Wedge 2 is the medium term wedge which I believe is a continuation pattern from the Jan - Feb correction
If you recall, the Jan - Feb correction represents a trend line break of the seemingly improbable Fibo-busting 2-yr bull run from Feb'16.
So a breakdown from Wedge 1 will give us a -2% downside target to 2660 which happens to the the lower boundary of Wedge 2.
A breakdown from Wedge 2 will give us a -10% downside target to 2440/60 which happens to be the 38.2% retracement of the Feb'16 uptrend.
Follow me so far?
This reinforced the signal from my UST/SPX relative return model which is in deep buy territory for UST, hence my earlier calls to buy TY1!, TLT and did I talk about T US? Hang on to your breeches!
US 10-year T-notes. Downside could be limited. Target corrected.This idea supports the previous interest rate outlook.
I advise you to book profits on the idea given last September (see related) earlier than set target at 116'07
and this is why:
The long-term trend together with the previous low offers strong support for the price and could reject the drop in the 117-118 area.
In this area the wave C = 1.272 of wave A and this also fortifies the support.
So better close shorts there.
TY1!: ABCB completion on structural multi-decade trendlineIn a world where bunds and JGBs are zero bound, why wouldn't 3% yield and an appreciating USD be attractive to global investors? There is a weekly ABCD completion in the TY1! on high volumes which coincides with a major multi-decade structural uptrend support. A break above 119.40 in the 240M chart would be confirmation. A long in the UST10 can be hedged off with a short in the ES1! where momentum is waning off.
US 10YR T-notes. Bear Flag. Sell on breakdownFED announced balance trimming.
The technicals perfectly match that decision (always a matter of disputes between tech analysts and macro analysts).
We got large correction before and broke below it.
Now the price made a perfect pullback to the broken line shaping my favorite Bear Flag pattern.
Watch to sell on breakdown.
USD interest rate growth could be limited by previous top.At the end of last September I called for the drop in the 10-year US T-notes with quite aggressive target (see related idea).
In this and the next update I came to the thought that the drop could be over earlier as rates are reaching important resistance level.
Despite the aggressive tone on the rate rise in US, I think the upside is limited based on this chart.
Wave 5 of (C) already has reached the target zone and approaches the former top at the 3.04% where the wave 5 = 0.786 of waves 1-3.
It is quite possible that when we would reach that area above 3 pct something in the economy could cry out - stop it!
Let's see!
Possible reaction zone in US-GER 10Y spread $DXYWorking on daily swing low, weekly hammer $ZN_F, $FGBL, $EURUSD
INTERMARKET | Gold vs Treasuries DivergenceWorth keeping an eye on here to see whether the divergence yields some timing insight here into gold.
Positioning | Net Non-Commercial US 10y T-NotesAt extreme levels, however, the data doesn't look correct... I'm certain it is the most extreme since 2005!
Near term bottom for 10 Year T-NoteRSI divergence after massive and over extended decline. RSI also in oversold territory for almost 2 months.
Price hit a long term support level, formed a hammer candle last session, and engulfing bullish pattern today.
