I suspect tomorrow we'll see quite a bit of knee jerk reactions to the F_O_M_C and possibly to Greece. It's nearly impossible to say what the short term outcome will be as one could be taken by the market dovishly (positive) while the other is taken bearishly leaving a situation in which one cancels out the other. I have long suspected that the F__E_D has known exactly when they were going to (are going to) hike rates. As I have said to some of you in email correspondence, if you are running the largest financial organization in the world, you don't make huge decisions that could have untold effects on the fly. If you have a business you wouldn't make a decision to expand it by 50% in a day or even 2-days, you'd be long prepared for it. If you were going to lay off half your work force, it wouldn't be a decision you made in a single day as if it was like choosing whether you wanted eggs or pancakes for breakfast, it's something you'd prepare your company for to survive the new dynamics. How much more so for an organization as big and powerful as the F_E_D?
I have also long suspected via comments made well over a year ago by F_E_D speakers about when lift-off would be and what they expect the rates to be at toward the end of 2015, that June has just as strong a chance as being the date of lift-off as any date (market consensus seems to be around September). The F_E_D is clearly ignoring or downplaying all of the reasons not to lift rates, although I don't think it's smart to be at zero in case the next recession is right around the corner leaving them boxed in, but at the same time, the economy doesn't look like it's anywhere near overheating or even in possible trouble of overheating any time in the near future which is what rate adjustments are usually about, if anything, it seems the F_E_D has their own reasons and has either doubly seasonally adjusted data to get a more reasonable print for a rate hike or they have minimized and downplayed recent weakness as transitory. When was the last time the F_E_D's projections were correct about anything except the Atlanta F_E_D's Real time GDP program which has been right on the money, but if the F_O_M_C followed that, they'd be far from even considering rate hikes. They have reasons that they are not saying aloud and that's what's really scary.
In any case, as for TLT/longer term treasuries, it's difficult to say what the knee jerk reaction will initially be as the F_E_D inspired knee jerk reaction is almost always wrong and almost always retraced within a couple of days or a bit longer. My suspicion has been that TLT/longer term bonds would pullback just a bit and move higher and at the same time the market would bounce just a bit (as bonds are pulling back) and then drop lower (as bonds are moving higher). There have been all kinds of strange correlations between Treasuries and equities, they have been on and then off, but it's the short end of rates that the F_E_D controls, the long end the market dictates. TLT is 20+ year bond fund, /ZB below are 30 year Treasury futures.
I've posted the channel buster concept numerous times specifically dealing with the break below the long term trend line in TLT and how it is used to shakeout what is a trade pretty thick with shorts, a counter trend rally as I do suspect that at the end of such a move, Treasuries do head lower as they have been (see the trend below). As for recent daily candlesticks, Friday put in a bearish reversal Shooting star, Monday put in something close to a star, but added no additional upside as it hit resistance from Friday and thus far today we have another small bodied candle that will not make a higher intraday high, it looks like a small reversal process for that short term pullback I've been looking for.
30 year Treasury Futures (/ZB) are more sensitive to near term timeframes and have pretty good/consistent signals which also suggest near term pullback. The bigger picture counter trend rally is really addressed in other posts I have put up every time I've updated TLT, like the Bond counter trend set up so I'm not dealing with that here/now.
3 min ZB/30 year Treasury Futures are in line at the green arrow and then the red smaller negative divergence suggesting a pullback.
5 min ZB with a positive divergence, then in line/confirmation (green) followed by a negative divergence along the lines of a pullback.
15 min ZB positive divergence (leading) and the current negatives, but not horribly strong.
ZB positive and a relative negative (weaker form).
This is the 2 hour ZB chart connecting the first base area (positive) with a pullback from higher prices and a second low/base with a positive signal. This is getting more in to the counter trend bounce area, but near term I still think it comes down a bit and opens up a nice opportunity to add TLT calls or long positions, of course as always I want to confirm that any pullback is constructive and accumulated, that's just me being extra careful.
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