I am bearish bonds & bullish rates. This is very easy to say now. It was not so easy in mid August when when I wrote this:
"So far my top call on TLT is still holding. I'm not totally certain that it does, but with TLT below the AugP then hold your shorts if you took that trade. Regardless, if TLT can rally again, then I think this will be a *very* key high. It might be higher, perhaps a double top, maybe lower; but after this, I will be quite bearish TLT and bullish rates. I am basing this opinion on the Bollinger band and RSI action on TLT across timeframes, some timing work, and the aforementioned perspective on government intervention in markets."
And this:
"So the translation of my historical and vaguely psychological references is this: maybe interest rates start to rise, and this is initially welcomed. Financials would rally, and money would come out of bonds into stocks. This will be enough to lift SPX into my ideal target zone of 2250-2500 from 2017 Q2 to 2018 Q2."
OK, i'd say these are nicely on track. But here are reasons why TLT is more likely set up for a bounce (rates down) as the next near term move.
First reason - TNX YP
Standard long term pivot chart below, with long term pivots, support and resistance only (no medium term). The YS2 was part of the turn call in early July - even though TLT was only on quarterly level, I saw this and thought it increased the chance of a major turn. So here we are at a huge move from YS2 all to YS1, some digestion, and a fast jump to YP. Perhaps it will jump above this too. But still with the YP here we can watch for a possible reaction.
Second reason - ZB1 and ZN1 continuous contract futures charts
Are also at their YPs here.
Third reason - TLT Q4S3 (!) and nearing NovS3
This is pretty rare. TLT is below its YP which may act as resistance, or may recover. Often before there are real long term trend chances - USA stocks stabilizing in mid 2009 for example, there are few tries at a big level. The same thing could happen here - break, recovery, break, weak recovery, then that is IT and definitive move lower. Also check the volume bars with massive spike on 11/9, still very high on 11/10, then back to normal on 11/11. First wave of selling could be in right?
Fourth reason - TLT 161% ABC
This chart shows the drop from 9/28 high to 11/11 low was 161% of the move from the 7/8 high to 9/15 low.
Additional considerations
RSI only daily chart is 19. This is *by far* the lowest of the decade. It is fairly rare event even to have RSIs below 30. Often when RSIs are this low, the market needs to make a divergence low - meaning a bounce, then another move lower in price but higher in RSI. I'm not saying this is *the low* in TLT. I think the path is turn, digestion for some period of 1-4 weeks, then another move lower in TLT and higher in rates.
Lastly, some other timing work points to a turn.
I'm not saying long bonds as a position. TLT is below all pivots! At this point it would be a speculative trade which I recommend *very rarely* because it is just easier to buy what is going up. If you are not all in on what is going up when multiple asset classes are above all pivots, don't start buying what looks the worst. But it could be an interesting hedge against XLF longs, a partial short cover point, or short term trade possibility for those playing the hourly charts or short term options depending on what unfolds next. Now matter how you swing it this is a counter-trend move here and these are best approached with caution, and to be clear, I am pointing to the possibility of this move and not an actual trade rec at this point.
Remember, the key levels here - TLT Q4S3 121.89, TNX YP 2.13, ZB1 154.79 and ZN1 127.17 - have to turn, or overshoot and recover for this to be valid.