TLT/TBT Update

TBT (UltraShort 20+ year Treasury) is a 2x leveraged inverse of TLT, (20+ year Treasury) and a long trading position in the trading portfolio.

The last couple of important updates include: TLT, 30 year Treasury Futures & TBT Update this update gives you a good baseline for the TLT charts. The most recent significant update was from 5/12, TBT (long) / TLT Update in which the following was posted...

"looking very near term it looks like TLT will see a short term bounce, perhaps just some backing and filling (maybe not even that-maybe just early signals like the rest of the market), I decided to hold the position(TBT long, 2x short TLT) as it's the longer term signals that got me in to the position, "Plan your trade, trade your plan".

In other words, we saw the TLT bounce/TBT pullback coming before it hit, but I decided to stay with the TBT long as it was entered as a longer term position, not a in and out position, there's simply not enough profit potential in my view to treat this kind of trade in that manner.

Yesterday I looked at the position again as it came down as expected from the 5/12 update and this morning it's about where I expected a pullback in TBT/bounce in TLT to end up, but a bit faster than anticipated, however, everything in the market (despite yesterday's flat, boring day) has been moving faster, take the USD/JPY $102 scenario.

This is what we have as of this morning, I will probably keep TBT as an open position, but I do want to see some movement as the day goes on.

 1-day TLT chart, I've been hoping that TLT will come back down toward the base area near $102, where I'd like to look at a long term long TLT position, note the large "W" base and head fake move just before TLT broke to the upside.

For some perspective, this is a 5-day TLT chart.  We could call the 2011-2013 price pattern a H&S top, the break below the neckline would be a move to stage 4 and we know what the highest probability move after the initial break below support of a stage 3 top is, a Volatility shakeout of the shorts which typically runs at least above the neckline (former support) so TLT could very well be doing exactly that on a longer term basis as this is a 5-day chart and the market tends to be symmetrically fractal.

As for the charts that I am interested in for the actual TBT position...

 TLT's 60 min leading negative divegrence is but one of several that make TBT an interesting longer term play, but not quite a core/trend position.

The TLT 2 and 4 hour charts are also leading negative.

 The confirming chart would be the 60 min TBT positive divegrence as it trades opposite of TLT with 2x leverage.

The 15 min TLT negative divegrence which puts a TBT trade within reasonable reach.

And the TBT confirmation with a 15 min leading positive divegrence.


As for the pullback noted 5/12 as TBT had hit a new local high, these are some of the charts telling us that this was coming. I could have taken the TBT long off and opened a TLT long, but again, the profit potential for this position is not in scalping, it's in following the longer term trend signals.

 TLT 10 min went from in line to negative where we entered TBT long to a positive divegrence on the 12th as mentioned above. This chart is in line or a bit better so we probably need to see at least some deterioration before TBT becomes either a new long or an add to position as several of you have been asking about it.

 This is TBT's 10 min chart with a negative divegrence on the 12th, but not as distinct, the positive divegrence of early May can be seen and that's where we entered TBT long and why.

 TLT's intraday 1 min chart is turning negative now, what we need to see is this divergence migrate to longer charts so we know it is progressing and not just an intraday jiggle.

The 2 min chart is hinting at migration, but it's a bit too early to know for sure, thus I'll be watching today.

The 5 min TLT is in line and this will have to see deterioration before TBT long is ready.

Interestingly though, the 5 min TBT chart shows no move to match price, it remains leading positive despite the pullback.

I decided to try to resolve some of the inconsistencies by looking at the 30 year Treasury futures and found some interesting charts...

 This is the 30 year (very similar to TLT) 1 min chart going negative intraday.

This is the 5 min chart already leading negative

And the 15 min chart very close to a leading negative position if 3C turns down and locks in the pivot and divergence.

And the same with the 60 min chart, it is in leading negative position.

The bottom line is I think TBT will be fine, but for those interested in a long position or an add-to position, I'd give it just a little more time so we have strong objective evidence, even though we have strong probabilities already.