TLT / Treasury Trade Idea Update

The TLT long/call position (second half) that I'd like to fill out, but have been waiting for it to finish its reversal process and hit stops under $118.50 (hit) and $118 (not hit) is looking a lot better, a lot more interesting for a strong counter trend bounce/rally. 

As I have said numerous times and we just saw the last 2-days in $USDX, Counter trend rallies are usually some of the strongest rallies you'll see even though they are destined to fail. They need to be strong to be convincing and turn sentiment around against the preceding trend, thus the name "counter trend" rally.

I don't think it is just TLT or 20+ year Treasuries that will see a counter trend move higher, I believe it will be across most of the curve from 5 and 10 year out to 30. I don't have any specific data on 2 year or less.

As for the charts, I'm very close to pulling the trigger and filling out the second half of a partial position already started, there's a few intraday charts I'd like to see "jump off the chart" as I often describe it.

This post from May 7th (note the date, it keeps coming up in asset after asset), Bond Rally / Swing will give you a strong background on the concepts and reasons we have been looking at TLT for a strong counter trend rally and why we have already put out a partial position and why it was a partial position to be filled out at a later date.

As for the charts...

 This is the break down in Treasuries which were unbelievably strong performers last year. Almost the entire year the 60 min 3C chart confirmed their upside, then suddenly it didn't and we expected something to happen, this is what happened: lower highs and lower lows with a long term trend line break which is the set up for a counter trend bounce as you'll see in the post linked above.

I fully expect Treasuries will head significantly lower after a strong counter trend rally.

 This is the area of what I have seen as a base and shakeout of shorts. Notte the rounding bottom and the last 2-days forming almost a perfect Tweezer bottom reversal candlestick pair. If today's daily candle looks like a bullish one and volume increases significantly, I think today will likely be the day the counter trend move begins.

The first major momentum would come above the trendily on a short squeeze, although I would like to see $118 broken first, it would be an excellent timing signal and call (option) entry point.

 In past updates the 60 min chart has been in line with the downside move, this is the first time it has shown even a hint of a positive divergence which looks to be migration as the 30 min charts just before the 60 min have been positive.

For example this 30  min. Note the date the major part of the divergence was in effect, May 7th. This is an impressive looking divergence for a counter trend move.

The 10 min chart leading positive and again those same dates of the 6th and 7th of May. Institutional money obviously was involved in setting up a cycle and likely rotation, but this is through numerous asset classes from FX to treasuries to commodities and equities.

The 5 min TLT chart, again the first divergence at the same dates.

Right now I'd like to see either a move below $118 to hit the stops as that would be an excellent timing indication and discount for a call position entry and/or a larger leading positive divergence as I drew in to the far right with an orange triangle...ideally both at the same time.