TLT/Treasuries Counter Trend Rally Follow Up

Last week I opened a partial tracking position in TLT, I wanted to use some longer dated calls, but couldn't get them through so I needed up opening a half size position (which was the plan the entire time-calls or otherwise) short TBT (2x short 20+ year bonds or 2x short TLT) which created a 2x long TLT position essentially, Trade Idea: Long Bonds / TLT

If you read any of the posts from last week like the trade idea above or the charts/reasoning here, Bond Rally / Swing , you'll see I suspected TLT/Treasuries would come down and that is where I'd fill out the second half of the position. If you need a quick explanation of the logic of the trade idea, see the Trade Idea: Long Bonds / TLT post from last week. There's a Channel Buster/head fake, there are 3C signals, there's huge short interest for a squeeze.

I do not think bonds are going to see a primary trend reversal, I consider this a counter trend rally which will see treasuries hit a new low as the rally ends. However, counter trend rallies are some of the strongest rallies you'll see in a bear market or otherwise.

Right now in my opinion, TLT is looking a bit better or more mature in basing than the market averages, but I also think they'll move roughly in sync which IS NOT NORMAL. We've talked about the reasons, you've seen the $USD analysis, binds tend to drop on the carry trade unwind, although some think the ECB has been a bond seller rather than be stopped out at -.20% Maginot line they have. I don't know if there's validity to that , but I do believe this is carry trade related as the $USD and Yen give evidence of it.

However right now Treasuries are one of the most overcrowded shorts near the historical extremes for shorts.

Here's what we have in TLT so far. I'm not going to go too far in to Treasury futures because that's a lot of charts, but it's not just the 30 year bonds, it looks like the entire curve will rally on a counter trend move so I'm looking for an area to enter the second half of the trade started late last week as the second half depended on a pullback and I'd say we've met that criteria.

 Yesterday I posted the 60 min chart and probably in last week's posts as well linked above, it's clearly in line with the down trend, thus I don't expect more than a counter trend bounce which is not meant to belittle a counter trend bounce/rally... as I said before, these are some of the strongest rallies in a bear trend you'll see in any market trend. Look at the first counter trend rally after the initial crash of the Dow in 1929, it was a near +50% move, that is their job, to suck people back in, to make them believe. In this case the thick shorts should be helpful as well.

In any case, the 30 min positive divergence is what I was pointing out and the 3C concept of the minimum target being where we first saw the divergence which on this chart would be around $124.40 with a gap around $127. Looking at the size of the base under construction, I'd say that's probably a very realistic and easy target to hit ($127). I wouldn't be surprised if we got a move to about $128 on a volatility shakeout of technical shorts...

That's the initial break of the long term trend line that draws in new shorts and the market often runs them out with a move back above the trendily causing a short squeeze and emotional reactions. In any case, you can see why I'd prefer some leverage even with a decent technical move.

 The 10 min chart is positive on the suspected pullback from last Thursday. Look at volume, this looks like a clear head fake/stop run. "All of those shares are below to us!"

 The 5 min chart also looks good, we have nice consistency among the multiple timeframes...

And the 3 min chart including the negative divergence that formed the day after the initial partial entry as was suspected then along with a leading positive in to the recent new lows.

You can see a wider "W" shaped base with a head fake move in place so I think this is close to being ready to make a move.

 This is the 1 min intraday chart, it went positive at the lows today, but looks like a pullback intraday. I'd like to see it move toward yesterday's close or below on a stronger positive divergence and I'd likely consider that the second entry point.

The 2 min chart is showing a little migration of the 1 min chart's current intraday negative "steering" divergence, so again I suspect a run a bit lower to allow them to accumulate more at lower prices and this is where I'd like to add the second half. I suspect it will be today.

Just to show you, these are treasury futures...

 The 1 min 30 year (similar to TLT) reacting positive intraday as you see above on  the TLT charts.

 This is a 15 min chart of the 10 year Treasury futures also positive.

And a 30 min chart of the 5 year treasury futures.

I show you these because as I have said several times, this looks like a broad based counter trend rally across the entire yield curve, not isolated just to 30 year Treasuries.

I'll let you know as always once I decide to add the second half of the position to the tracking portfolio.