I confess I didn't like the move this morning in TLT or rather 30 year Treasury futures, but when you consider the kind of move I expect we'll get, a Channel Buster/Counter Trend Rally and then you put price in to perspective, there's tons of potential upside and we haven't even moved above the trendily yet where a short squeeze would kick off the momentum move.
In any case, here's an update for TLT which has gapped up this morning, but I would not be surprised to see it fill that gap at least partially and I suspect there's more work to be done,
however if it is done I think this will be one of the strongest trades of the year so far unless you are an FX trader and caught the $USD counter trend move.
This is the daily chart of TLT, just a few days ago I posted a look at our TLT analysis from a point which was 2-days off the all time highs (
white arrow), from a conceptual point of view (as these same concepts work in any timeframe with any asset), it's a very useful post in which you can see the call made 2-days removed from the all time high and what happened since all based on our concepts. That post is here,
Looking Back to the Accuracy of Our Concepts & Looking Forward: TLT
As for TLT since, it has made a series of lower highs and lower lows better known as a downtrend. The concept of a Channel Buster, when TLT broke below its long term trendily sets up an interesting trading opportunity. If you are interested in the specific concept applied to this specific break of the TLT trendily, check out this post,
Bond Rally / Swing.
For our purposes of this post, the more convincing a break below the trendily is, the more shorts it will bring in and the stronger a short squeeze when their obvious stop is hit, a move back above the long term trend line.
As for the charts in TLT (20+ year Treasury futures), which are different from 10-year treasuries and shorter term treasuries which are directly influenced by the F_E_D, long term Treasuries are more influenced by the market, however I'm not making the case for anything beyond a counter trend rally in TLT, long term I think they are far more doomed than the current downtrend even suggests.
This 5 min TLT chart is showing the kind of 3C movement I've been waiting to see, strong leading divergences. The red area to the left s the high that separates what I believe to be two bases that should actually come together as one larger one and for that to happen, stronger leading positive divergences like the 5 min above need to build.
Here are the two separate areas that I believe will actually be one large double bottom and before I get a bunch of emails about double bottoms and their second low not dropping as low as the first, that's nearly a century old view of double bottoms, Wall Street has figured that out a long time ago so double bottoms now almost always run stops below the first bottom and that's where they get the main portion of the base's strength as the shares are on the cheap and in large supply. Ultimately I'd like to see this chart (15 min) and the longer ones like it show the kind of leading divergence the 5 min chart is showing.
As for intraday...
This is today's move/gap up, it has an intraday negative divergence so I suspect it comes back down a bit. Actually the divergence is even more developed since capturing this chart.
30-year Treasury Futures...
This is the 5 min leading positive divergence in 30-year Treasury futures, I think most would find it interesting they are giving the same signal at the same place as TLT, but that's just multiple asset confirmation, I'd be concerned if I didn't see this.
The 15 min chart is also showing a leading divergence which is excellent as far as the development of the trade set-up/idea goes.
Even the 30 min chart is leading positive-note the negative or the high separating the two base areas at the red arrow.
Smart money isn't willing to chase prices higher like retail is, once prices have moved too far north they simply knock them back down to their accumulation zone.
And this is the 60 min chart like the longer term TLT chart above showing the two base areas. Note the light blue arrow I drew in to the far right,
this is the kind of leading positive divergence I'd like to see before entering TLT calls and from here, it could happen very quickly.
I WANT TO MAKE SOMETHING CLEAR THOUGH... I expect that we'll see a counter trend rally in long (curve) treasuries like 30-year (or TLT) however I do NOT see this as a trend reversal.
I think you might find this interesting, it's the daily chart of the $USDX.
Remember the $USD's base and then carry trade take off to the upside, then a negative divergence and the $USD made its last higher high and has been making lower highs and lower lows since.
As you probably know, IO believe this is all evidence of the carry trade ($USD) unwind.
We have had quite a few posts covering carry trades, the signs and signals seen with them and with their unwind. What is the first and most popular asset bought with carry proceeds?
I'll give you a hint, Treasuries WAY outperformed stocks through 2014. If you said US Treasuries (as it's a $USD based carry trade) then you were correct. So, now look at this next chart which is the exact same daily timeframe and same zoom factor...
This is the 30 year Treasury futures daily chart, look similar to the $USD?
There's a reason for that.
Also, like the $USD in a leading negative divergence and its uptrend broken, this chart shows the same or worse. This is not only evidence of the carry trade unwind, but this is the reason I say that I would not expect much more than a counter trend rally which can be well worth the trade, but I don't see any sort of reversal back to the upside, in fact after a CT rally, I'd expect treasuries to move much lower.
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