Treasuries Counter Trend Trade Up Next?

This morning I closed the TLT Put position, TLT Follow Up, for near a +40% gain and this was just on a simple pullback.

If you have followed the $USD forecasts including a bounce up (as of April 2nd's forecast) to be followed by a much larger trend down, which has occurred and then a counter trend rally which put in the strongest 7-day move since 2008, you see how strong these counter trend moves can actually be, one of the reasons I think money is a lot easier to make and a lot faster to make in a bear market as they fall much faster and their counter tired moves are ferocious.

So far today, the $USD which we called as being at the end of the counter trend rally/bounce Friday, has made the 2nd biggest 1-day drop since March of 2009. The obvious point is that these counter trend moves can be monstrous and if we can do +40% on a simple pullback, how much better can we do on a counter trend rally in TLT which had its idea rooted in this post, Bond Rally / Swing

All of the concepts that make this a powerful trade are posted right there and they are not unique to bonds or currencies, these concepts can be applied to ANY asset in any timeframe.

For the TLT counter trend rally to work, it needs to show accumulation and we generally aren't in put trades that are showing accumulation so it would be rather new near term.

Also keep in mind that bonds are one of the first assets to break down after a $USD-based FX Carry trade, so while it would make some sense that bonds hit new lows with the $USD breaking down, I also pointed out last night that Treasuries which outperformed equities last year, have already put in quite a trend reversal, one that stocks haven't seen yet. Thus a counter trend rally in bonds/TLT would allow the assets bought with carry trade proceeds to be exited at better prices or perhaps smaller losses in some situations. So we may expect certain behavior based on the norms, on a short term basis (the $USD counter trend rally was about 2 weeks), short term differences away from our expectations can very well be part of closing down a carry trade.

 TLT (20+ year Treasury Bond Fund) daily chart. In 2014 TLT/Treasuries outperformed the SPX with a +23.25% gain.

Note the lower lows and lower highs in TLT already, even after outperforming the SPX by nearly a 2:1 margin. This is a typical sign of a carry trade unwind, but while bonds are the most popular asset financed with carry profits, the chase for yield also saw equities get their fair share of proceeds.

 Yet, even though the SPX only put in a +12.39% 2014 performance vs Treasuries +23.25%, we have not seen the same kind of equity unwind yet. Perhaps... Treasuries will see a CT bounce allowing them to be exited at lower losses or no losses while rotation turns to equities?

 Since closing TLT this morning, it has started building a new positive divergence seen on a 1 min chart above, good thing it was closed when it was...

This has migrated quickly today to the 2 min above.

The 3 min

And already the 5 min chart in half a day.

Even the 10 min chart is starting to go positive.

However this is the second part of a larger base...

 You can't really understand the principles that would guide such a strong move in TLT/Treasuries if you don't understand the trade set-up, which again is here, Bond Rally / Swing.

The Counter trend bounce/Rally would be part of a Channel Buster and break above the long term TLT trend line which was recently breached in a trade thick with shorts.

I expect after this last portion of the base is in place, we'll see a strong move above the long term trend line,  but I don't see this as a reversal that will hold-the same thing I said about the $USD. It's a counter trend bounce, but as you saw with the $USD, they can be insanely strong.

 The larger  picture in TLT -30 min with the second area of the larger base starting today. There should be some reversal process, but I think we are much closer to the start of the trade than we may realize, I expect to be opening it this week.

Again, if we can do nearly +40% on a small pullback, imagine what we can do on a well-timed counter trend rally.