Short
More downside for TLT after a bounce
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.
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.
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