Possible bond bounce

The Pivotal Perspective has been clearly and vocally bearish bonds since the start of the year. It was made easy by this method with various bond classes TLT AGG LQD starting the year below major pivots, as mentioned here on 1/7/2018, as cautioned here later in January using total return technicals, and mentioned subsequently in many Total market views.

The case for a bond bounce bounce consists of:
1. False new low and recovery on TLT last week (price action)
2A. Near test of HS2 and hold (pivots)
2B: ZB cont contract near YS2 tag and hold (big turns on yearly levels and seemingly unstoppable trends can and do end on YR2 / YS2s)
3. Monthly and weekly chart Bollinger bands, moving averages and RSI (other technicals)
4. Crowd positioning (sentiment)
5. Timing with 5/15-16 listed as "important change of character" and so far 5/14 index high and 5/17 bond low. 
6. Total return technicals show TLT and AGG on YS1s and holding

Charts for #1-3 and #6 are below. If thinking about a trade an easy trigger would be TLT closing above its WP (weekly pivot).

1 & 2

2B ZB YS2 near test and hold - now other major turns on levels with arrows

3 TLT weekly
Bollinger band divergence low along with holding the range

20 51 TLT W.png

3 TLT monthly
Holding lower band and rising 100MA

20 52 TLT M.png

Bonds

The first issue here is what index to use. Here's a starter list:

TYX
TNX
ZB (cont contract, then current for shorter term moves)
ZN
TLT
AGG (based on Bloomberg Barclays Aggregate Index, not the same as the above 10 & 30 year Treasuries, but still a major bond benchmark; however, this is price and not total return)

It would be easy to pick just one but the fact is the bigger turns tend to show on most of these.

2016 July turn (the top in bonds / low in yields)
TYX QS1 exact
TNX MS1, YS2 near tag
ZB QR1 exact, YR2 near tag
ZN YR2 exact
TLT QR1 exact
AGG no level

So major levels in play for each; most especially the yearly levels on the futures were most glaring along with YS2 very near tag on TNX. 

2016 Dec turn (major high in yields, low in bonds)
This one not nearly as many levels
TYX no level
TNX YR1 (bingo)
ZB MS1 only
ZN HS1 and YS1 2 day break and recovery
TLT no level
AGG MS1 near tag, not really enough

2017 Sept turn (high in bonds, lows in yields)
TYX QS1 exact
TNX HS1 1 day break and recovery
ZB YP exact (bingo)
ZN HR1 exact
TLT QR1 exact
AGG QR1 overreach then fail

Last week
TYX QR3 exact
TNX YR2 exact - enough? 
ZB monthly only
ZN HS2 / QS3 combo
TLT QS3
AGG HS2

So enough here for a possible turn, most especially the YR2 on the widely watched 10-year yield. The issue is the momentum of this move in 2018 has been quite strong. TNX has been above a sharply rising daily 10MA for most of the year. Even if there is a pause at YR2 it is likely that the 20MA (last touch 12/29/2017) will be support and highs will be tested. 

Though I pounded the table on taking defensive action on stocks 1/29-2/1 - and any shorts would have been very counter-trend at the time - this was confirmed by a glaring VIX, momentum overreach, sentiment extremes and simply the number of indexes on yearly levels which hadn't happened since early 2016.

I cannot do the same for bounds here. Buying below all pivots is a pure counter-trend. It could work and probably the trade is crowded at this point, but there are easier moves are elsewhere. NDX/QQQ, SMH (semi-conductors), XBI (biotechs) and KWEB (China tech) are all above all pivots. Tech is leading the market. The main strategy here at The Pivotal Perspective is to be long the leaders. 

24 31 TNX.png

Bonds

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. 

Interest rates, TLT and XLF

Aside from biotech jump this is the biggest story in markets. In July I was noticing how historically stretched the RSI's were getting on multiple timeframes and did two special posts here on 7/2 which said very stretched but should see a bit higher, and here on 7/9 which said a turn was starting to be possible. On 7/6 in the SPY daily I made the one and only counter-trend short recommendation on this site ever and picked off the level within .02 using pivots.

From 8/15 big picture thoughts: "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." 

Q4 as started very bearish for bonds as written up here, and each safe haven section from mid October on has pointed to bond weakness. Now what?

Let's start with long term charts. I usually refer to TLT, but for even greater long term perspective let's check out TYX. This has been under the 10MA (aqua) since 2014 Q3 until just now. I think the momentum move is to stay above, and the next level to test will be the 20MA at 3.03. While ultimately I think higher, maybe some reaction from this level and round number area. Longer term, if correct on the rally idea, a move to the upper BB and falling 50MA is not out of the question. Currently these are up near 3.8.

Going back to TLT for the monthly chart, it has broken both the 10MA and 20MA with 50MA at 120.91.

Now the weekly long term pivot chart shows a break of 2HP and resistance from there, and straight down to the YP at 124.65.

TLT daily pivots only (no support or resistance) shows the entry 10/3 with rejection of Q4P and OctP, falling MAs, MACD rolling over. The 2HP really never bounced and the move stayed under the falling 20MA (orange) the entire time. TLT is breaking the YP at 124.57 with no attempt to bounce! Now we might see a break and recovery (like IWM & QQQ recently) but let's watch this key level. Below this means below all pivots for bonds! This is the first time since July 2015 we have seen bonds this weak.

Adding in support levels and momentum, either this YP area stabilizes or we could see Q4S3 at 121.89

This huge move in bonds and rates has turned financials into the leader of the market. XLF above Q4P the entire quarter! What else can say that? All USA mains broke at some point. Only EWZ Brazil and SMH/SOXX held up sideways above Q4P as other indexes dropped. On 11/7 XLF was above all pivots. The market gave plenty of time to spot this relative out-performance. 

Other financial indexes may differ a bit. IYF is the ishares version. It too jumped above all pivots on 11/7, but had a fractional break of Q4P 11/2-4. But both have made new highs for 2016 before anything else that I track. Are financials about to take over leadership like tech & biotech in 2011-15, and EWZ and SOXX in 2016? 

Bonds update

As yields were making historic lows I wrote a few special posts on bonds - check the tag. 

7/2 thought yields should go lower / TLT higher, though stretched

7/6 recommended speculative short on TLT at a level that came within .02 of the high 2 days later

7/9 thought window for turn more likely, targets reached

Next week was the biggest drop in a year; only to come roaring back. Now what?

Sum
As of early July, I thought move had more to go. A week later thought we could have a turn, and that was right. Now the bounce in yields / drop in TLT has been disappointing, and now it seems more likely that TLT tests highs or higher. This will be especially the case if TLT reclaims all pivots above AugP 140.72. 

To put the move in context let's again looking at long term charts of TYX.

TYX Q
The red line is the 2015 low and I had to make it thinner so you could see the current bar. Now we are only about halfway through Q3 but really this bounce has been very weak thu sfar. Look at others that get going from the lower band. Comparatively, this is just not going anywhere. If TYX drops under the 2015 low again of 2.22, watch out below. 

TYX M
Monthly chart with same idea. Despite RSI near extreme, very weak at the current level. 

TYX W
Stayed under a sharply falling 10MA (aqua line). RSI only reached 40 on the bounce. Even a bounce failing near 50 is more common and still a downtrend. Quite weak! Maybe we will see the lower band again.

TYX D
Daily chart clear drop from the 50MA, and already back under all MAs (10, 20, 50, etc). Not hard to imagine a visit to lower band at least. 

And a TLT chart with pivots and MAs. If above the AugP I would expect a move to Q3R1 again and maybe up to long term resistance levels above that near 146-148.

Bonds update - and another turn nailed!

If an analyst on Wall Street caught the low of the year in oil after an 18 month crash, the key low in stocks after the worst start to a year in a century, and then somehow managed to recommend a short in bonds literally AT THE HIGHS, not to mention turning bullish on bonds early in January and bullish on gold later January, oh yes, there's more, calling for a key turn in stocks just after 6/9 and then was steadfastly bullish on stocks 6/27+, then that analyst would probably would be in for a 6 figure bonus, maybe 7 even, and/or starting up his own consulting agency a la Tom Lee at FundStrat, or at least getting some CNBC TV spots, don't you think? 

This would especially be the case if that analyst was not trying to buy oil all the way down, only on the low of 2015 and low of 2016; went out of his way to say don't buy yet regarding stocks in January, but started to buy in February, then added on the way up; said buy bonds then ADD, buy gold then ADD in January and February; and said short bonds ONLY ONCE this year year, on 7/6, within .02 of the exact high in TLT!? In other words, that analyst was not a broken clock right twice a day, but have nailed the key turns this year in oil, stocks and so far, bonds too; and been on the right side of all the major trends of the year. And could even go on with other recommendations in EWZ, RSX, EEM, SOXX, even bitcoin!

Well I am that person - and sad to say, no Wall St bonus coming my way within sight thus far, but if you are fund interested in someone with proven capability of making these kinds of calls, - I'm available!  

So yes, here are the quotes:

7/2 on TYX daily chart: "From The Pivotal Perspective, downtrend in force below Q3P at 2.43 and still long term bearish below 2HP at 2.52. First target Q3S1 at 2.10, then 2HS1 2.02." 
"Also RSI extreme with some divergence. A reaction move would be normal, but given the momentum think we will ultimately see lower."

7/6: "Interestingly, as "analysts" are starting to sound calls for TNX 1.0 (the % not a computer program version), I am increasingly wondering about a major turn in bonds based on major levels and RSI. TNX came very close to reaching YS2 today and remember the big turns that seem impossible happen on the big levels, just like the USA stock low of the year on RUT YS2 exact. Remember, resistance levels are better used as profit areas on longs instead of shorts - but if you want to take stabs at speculative trades (ie short above all pivots), then multiple RSI extremes and levels are the place to try. Watch reactions on these levels: JulR1 reached today, then Q3R1 just slightly higher 143.64 which would be a good tag area for a setup. If above that then I'll start thinking 2HR1 / YR2 combo 145-148."

7/9: "So we saw 2.10 last week. We are starting to be in an area where a turn is possible..."

And 7/11-15 was the worst week for bonds in a year, and the TLT high according to my data feed was 143.62.

To be completely thorough, we could check pivots and other technicals on ALL of these:

TLT
TYX
TNX
ZB current contract
ZN current contract
ZB continuous contract
ZN continuous contract

On all appropriate timeframes. :)

So if you are still reading, thanks, and I will try to boil it down to the most important charts.

Lows
Very simply, TYX above 2015 low of 2.22 is bullish, and TNX above its 2012 low of 1.39 is bullish. 

Pivots
TNX within a hair of YS2. Note 2015 low of year very near YS1. 

TYX also on quarterly support; previous key lows on YS1, Q2S1, now again Q3S1. 
 

Both ZB and ZN continuous contracts near YR2s! ZB a bit shy, Q3R1 only; ZN YR2 exact!

Other technicals
Put this in a backdrop of a historically stretched Bollinger band and RSI combination as outlined here. For now just posting monthly and weekly charts on TLT.

 

Will this be the high of year in bonds? I don't know, anything is possible. But TLT has dropped back inside quarterly, monthly and weekly Bollinger bands after reaching RSI extremes on the weekly and daily charts.

But it could just be down from here like the 2008 and 2015 highs, or we could see a divergence high like 2011-12 (ie higher in price, lower in indicators). Either way, I expect Bollinger bands to be more resistance from here. Also keep an eye on the Bunds and their yield, especially the 0 line :)

 

Bonds update

With bonds making all time lows in yield I did a special post on long term charts using TYX last week here. I thought both standard technical indicators and pivots indicated lower. 

Comments referring to TYX and yield: "RSI OS (oversold), but Bollinger band action is quite negative here... A reaction move would be normal, but given the momentum think we will ultimately see lower... "

And pivots: "First target Q3S1 at 2.10, then 2HS1 2.02."

So we saw 2.10 last week. We are starting to be in an area where a turn is possible, but given the momentum I think the most likely move is a bounce in yield (drop in TLT), then a move to longer term targets ie lower in yield higher in TLT. For TLT pivot view see today's safe haven post. Also keep in mind that on TYX we just saw near YS1. 

Let's look at charts again to show how rare the current move has been.

TYX Q
We don't even have Bollinger bands on the quarterly chart until 1984. Due to the relentless downtrend there are a number of quarters that have traded or closed outside the lower band: 1986 Q1 & Q2, 1991 Q4, 1992 Q3 barely, 1993 Q1-4 all year, 1998 Q3-4, 2002 Q3, 2003 Q2, 2005 Q2, 2008 Q4 and 2009 Q1, 2011 Q3, 2011 Q4 barely, and now 2016 Q3.

Sometimes the reaction has been a weak reaction sideways to climb back in the band like 2002-03 and again 2005-06, but some of the other snapback rallies have been pretty strong. Outside the band is trouble so we'll first have to see back above 2.12.

TYX M
(1990s and 2000s separated into 2 charts.)

Outside the lower band and RSI OS (oversold) is very rare combination. 

1986-Feb
1986-Mar
1986-Apr, major low

1993-Feb
1993-Aug
1993-Sep
1993-Oct, major low

1998-Sep
1998-Oct, major low

2001-Oct (RSI close enough), near key low

2002-03 RSIs close but not quite OS, ditto 2005

2008-Nov
2008-Dec, major low

2011-Sep

2015-Jan, major low

2016-Jul, ? ? ?

So we're talking about 15 months or so since 1981 that have been outside the monthly BB with RSI oversold and one of them is now. A third of these have been near major lows in yield - not the low obviously, since that was just recently, but most of these cases a turn that held for several months or years. It doesn't have to be this month, but could happen soon, this bar or the next few. 
 

TYX W
I am not going to repeat the same exercise (ie counting bars outside the BB and OS) but point is the same. It is well under the band here currently 2.24 but will be lower as next week opens. In 2011 there were 7-8 weeks outside the band and OS before a stabilization move; and in 2015 there were 4 bars outside with OS before a strong snap-back rally. Here we are on 4-5 (6/20 week inside the band in the middle of 4 surrounding bars outside).

TYX D
Only minor daily BB divergence - no RSI divergence. Weekly chart neither showing divergence. Usually (but not always) we will see divergence before a better turn up.

Bonds

This blog is about pivots but I do check other indicators - RSI, moving averages and their slope, Bollinger bands. Yields are entering into historically rare territory, technically speaking. This is certainly in part due to the arm twisting, to put it mildly, of global central banks. So I am not saying it stops here. But if it did we should see signs of a turn in the charts.

Usually I keep to TLT but to show the very long term history using TYX here. From The Pivotal Perspective, downtrend in force below Q3P at 2.43 and still long term bearish below 2HP at 2.52. First target Q3S1 at 2.10, then 2HS1 2.02.

Sum
The 30 year yield (TYX) tested its all time low on Friday. Not showing the 10 year TNX here, but that came .02 shy of its all time low as well.

RSI extreme with divergence reached on TYX daily chart, extreme reached on weekly that is somewhat negative, ie below 30, nearing extreme on monthly as well. All these give chance of some turn. However, I think the Bollinger band action especially on the weekly chart is bearish for yield; while a move back into the band is likely, the better yield rallies come after better looking stabilization lows inside the band. 

TYX Q
20MA resistance since 2014 Q2. the 2015 low was 2.22; 2016 low 2.20 and now 2.24. You get what I am pointing out here - the market just tested the all time low in 30 year bonds on Friday 7/1. Anything above 2.22 is potentially bullish for yield. 

TYX M
Monthly chart RSI nearing full OS. Just look how uncommon that has been since 2000. Most of those times have coincided with stock market turmoil. Another level to watch is the close of the previous low at 2.25. 

TYX W
And there is the low on the weekly chart. RSI OS, but Bollinger band action is quite negative here. My view: yields would have a better chance of a turnaround if we saw the down pressure slowing, ie staying inside the band, instead of a huge plunge below. 

TYX D
Also RSI extreme with some divergence. A reaction move would be normal, but given the momentum think we will ultimately see lower. If I am wrong about this, ie the turn is right here right now, we should see a swift move back above 2.25.

Bonds

Sum
TLT still in strong uptrend, above all pivots. Current high of year on 1HR1 / YR1 combo. While stocks have pushed higher TLT quietly back near highs. I could be wrong, but per this safe havens, stock and vix post feel something should give here, either safe havens should be dropping as stocks continue up, or safe havens stay strong and stocks have more of a pullback.

* * *

TLT W lifted from 1HP the first week and cleared the YP the second week. The high is bang on the 1HR1 / YR1 combo. After a 3 week pullback there was just 1 close below the 1HR1 which quickly came back as support.

Now what? While stocks pushing higher TLT has quietly rallied 4 weeks in a row. Not as zippy as first rally but that was when stocks were crumbling. It is hard to imagine a scenario where TLT is at 2016 or even 2015 highs and USA stocks are powering up too. 

TLT was above monthly pivots nearly all January, February; below in March but didn't even reach S1, now again above in April. Quite healthy trend, above all pivots again as of 4/1. There was some rejection at AprR1 but looks like coming back here today. 

Bonds

Sum
I recommended TLT on 1/6 when it jumped above pivots and then said add further if YP acted as support which was 1/22+. The first exit was nailed on 2/11, but then I said hold above the 1HR1 level which got shaken out and probably I should have used a zone of that long term level plus a medium term level.  

A recent play on TLT I said quick in and out but not sure the out was correct. I thought to move money into what was moving best and that meant stock indexes but this is still quite a decent trend. Near term will be watching relation to and any move from Q2 and AprPs that will be in play from 4/1.

* * *

TLT went from 2015 high very near 1HR2, all the way down to 1HS1; then up to 2016 high at 1HR2 / YR1 combo. Current it is holding 1HR1 as support. The long term level range is that 1HR1 up to high area at YR1 / 1HR2. 

Here is the daily chart with the same levels to see how active they were. I am not showing the quarterly and monthly pivots since they change over on 4/1. For the huge rally in stocks, TLT has held up quite well.

Some interesting BB divergence on the highs. Previous highs were outside the BB, this one entirely inside. But decent advance with strong rising MAs and markets can ignore divergence and continue higher. Near term I am wondering about a re-balancing drop in TLT.

This M chart just doesn't look too bad. Small red bar that held the open area. To me looks more like pause than reversal. Nicely rising MAs too. 

Bonds

Sum
TLT above YP, HP and even 1HR1 acting as support and Q1P; still under MarP. Upward sloping 20MA on Q, M, and W charts, but not daily. Ie, mostly still strong uptrend. However, potential BB and RSI divergence forming on the quarterly chart, for now something to note. For more see the details below. 

Recent rec of buying TLT if above both 1HR1 and WP did well, although probably a better idea was one portion on the 1HR1 and then add above the WP. That would have been lower average cost. 

TLT W well above long term pivots and despite 1 week break of 1HS1 recovered that level and acting as support. High of year on YR1 / 1HR2 combo so for now that is the long term range.

TLT D with medium term levels. TLT has spent all of March below its pivot and yet not much damage. Also, it didn't reach MarS1 while many stock indexes reached MarR2s. Point: TLT holding up quite well. If it maintains strength into quarter end then it will be poised to be above all pivots, but several days to decide that. 

TLT D with all levels harder to read unless fluent in these methods. Remember, MarP in play only through end month but active until then. Jumping above Q1R2 bullish today, though still some resistance near the MarP. 

As quarter end approaches I think it could be worthwhile to look at regular format charts on larger timeframes. Standard bollinger bands, 10MA in light blue, 20MA in orange, 50MA in purple below. Quarterly chart here and very strong trend with nicely trending 20MA. But te top shows classic divergence pattern from previous highs both on BB and RSI. The top is completely inside the BB while previous highs were outside; and despite a quarterl close near the high bar RSI likely lower. Divergence precedes big turns but also can last an excruciating amount of time if you are looking for a turn. For now, something to note. As we head into Q2, is the big money move sell bonds or buy bonds? Not sure!

Monthly chart below. A close here would look quite bullish, ie small red bar in  uptrend that held last bar open area. 

Bonds

Probably there was some selling on bonds / buying on rates heading into the FOMC, and now there has been a dovish surprise: from 4 hikes to 2 already and it is only March. Why not spare everyone the agony and just say .25% every December and then people can plan on 1% for the start of 2018? Oh well... 

Sum
TLT broke a long term level that could have held as support for 2 days but then recovered. Still above yearly, half-year, quarterly pivots; only below a monthly this month, yet didn't even reach the MarS1, a sign of potential strength. Using MAs, there was a 1 day slight break of a nicely rising D50 and recovery. Depending on if stock indexes do with their yearly pivots (SPX, NDX) into the end of the week, TLT maybe worth again keeping in mind as a buy (if out) or a re-add if had reduced earlier this month below the MarP to put into stocks. Also, rate weakness TLT strength likely corresponds with XLF weakness so that remains on the list of short ideas. Another post on that soon. 

TLT W chart below, and I cannot complain about the pivots as they have been an amazing tool for months. Just look at the 2015 high on 1HR2 and rejection under the YR1 and big drop from there all the way to 1HS1. After recovering the 2015 YP was clear support several times, the 2016 1HP clear support and launch, and now the 2016 high is bang on 1HR1/ YR1 combo. So if we have a mildly annoying slight break and now recovery of the 1HR1 level we just have to go with it. 

Here's a daily view of long term levels - I am showing the extreme high volume selling on the high which was also a tag of 2 long term resistance levels. That was the place to reduce any later adds. The 1HR1 level (red dots in middle of range) broke for 2 days but now recovering.

Daily view of medium term levels, note resistance also near FebR1, then especially clear on MarP orange dots. 

Now all together. 

Here's a more typical daily chart. That still has a nicely rising D50 which cannot be said for several USA stock indexes. If stock indexes fade back under long term levels this likely corresponds with TLT moving up. 

 

 

 

 

TLT and GLD update

If following The Pivotal Perspective you avoided a lot of the damage in stocks, started buying back 1 day off the low; and made great gains in the safe havens. Since these were the only things in the universe above pivots they were screaming buys, and then even adds as they cleared YPs in later January (for TLT) and early February (for GLD).

Recently I was shuffling the add portions expecting a safe haven drop if stocks bounced further, which was right for TLT and not for GLD. Let's take a look.

Wait, you mean those red lines at the top were there before the move? YES. From the open on 1/4/2016 yearly resistance levels like all yearly pivots are fixed and in play. So 1HR2 at the tippy top, also resistance at YR1 red crosses; so now the big issue is if 1HR1 lower red dots holds as support especially on a weekly close. That level is 127.87.

Here's TLT D with med term levels. You can see TLT below the small orange dot from early March, that is the March pivot. TLT has been mostly above the monthly pivot (except a few days) from December. Maybe we will see the S1 area 126.33 which is just a bit lower than the 1HS1.

So, if in from early January I think at this point hold portion above this area, 126.33-127.87. Any recent reduction below the MarP could be put back on if stocks indexes fail their major pivot area and we want to rotate back to more defensive. But if stocks clear their YPs and hold as support, we will be reducing safe havens further.


GLD also lifted from 1HP then jumped above YP and was at its YR1 / 1HR2 at the next bar. 3 weeks pause under YR1 but no red yet - that's bullish. If YR1 can act as support then the door opens to 124 1HR3 and maybe YR2 near 134.

Here's GLD D with medium term levels. Unlike TLT, it is still well above MarP support and much easier to hold above that. 

Lastly GLD D with all levels; there was some selling from YR1 but it has kept coming back. So far any reduction an error but we can see what happens. 

TLT and GLD update

The Pivotal Perspective has been all over the safe haven rallies because it was crystal clear using this method that both were making positive moves from important levels as stocks rolled over. Summary posts are here for TLT and here for GLD. 

Although I did say taking some gains from the more recent adds (TLT adds 1/25-28, then GLD adds 2/4-5) I encouraged to put them back on per bearish playbook. So we are in management phase of full positions on these. Now what?

TLT weekly chart with long term levels shows clear lift above 1HP, clear big high volume jumpabove YP, which acted as support from there; pause at 1HR1, tag of 1HR2 / YR1 area but maintaining pretty well. So the big issue is whether that's it for the year or if TLT will clear the YR1 and go for the 2015 highs or maybe higher. A simple long term strategy could be to hold above the 1HR1 near 128 that can act as support.

I don't like to see 2 smaller blue bars in an uptrend especially with wicks, but let's see how the bar closes and how stock indexes react to their FebPs from here. 

Here's the daily chart with medium term levels. You can see the launch above the QP and JanP, then Q1R1 turned into support, Q1R2 turned into support, but still struggling at Q1R3. OK, maybe Q1R2 will continue to hold as support. Also, in a few trading days, we'll have the March pivot which will probably act as support. Per my bias I think this is a full hold but it will be much easier if stocks indexes reject their FebPs. 

GLD was making an equally clear move a few weeks behind TLT. GLD did try to jump above HP & YP in 2015, but the difference at the time was that stock indexes were still above their YPs while this time they had crumbled. Knowing that is why I was really thinking the move was for real, in addition to seeing DXY weakness at the time. 

GLD too has quickly reached its YR1 / 1HR1 combo. So again we have the same issue - is that it for the year? Or will those levels clear and hold as support? So far just a pause, no red and looking like it could clear - and would be an easy hold for higher targets. 

Here's GLD D with medium term levels. Similar jump above Q1P, and was already above JanP at the time. No damage from Q1R1, a jump above that. Now it is consolidating under Q1R2 but not too much damage. 1 day rejection met with buying today. So I also think this is full hold and let's use March levels to held guide the position as well as keeping an eye on the big YR1 / 1HR1 combo. 

If you added GDX for kick above its YP, that is doing fine and looks like it should test its YR1 / 1HR1 combo as well with even a Q1R3 nearby all 20.20 to 20.42.

4:25 EST update.

A much different look at the close on each. TLT small blue bar with rejection from a monthly resistance level.

GLD especially poked above but did not close above YR1, potentially bearish if any lower tomorrow.

Bonds

It can be worthwhile to keep up with the bond market, even if just trading stocks. Sometimes buying safe havens is easier than shorting. Also, if bonds (meaning TLT here not yield) stop dropping then you can start thinking about a turn in stocks. 

For example, last year on the tech highs near 7/20/2015 TLT had broken its YP and was mostly below it for about 7 weeks from early June. That said it had tried to come back a few times, and on 7/22 there was a clear lift from support. After that TLT held its YP for the rest of the year. Rallies did not get far but that told you something about stocks for the second half.

This year TLT jumped above 3 pivots as SPY and others broke YPs on 1/6; for this method, this was a very important day and going with this change was the absolute right thing to do. 

For a full analysis of bonds you could check  TLT, ZB, ZN, TYX, TNX, then HYG, and then maybe even check a more typical chart view using Bollinger bands and  moving averages, but for today lets look at TLT on pivots. 

Sum from below: TLT had perfect long and medium term buy signal from early January, and adds after that above the YP. Pivots also gave a fantastic exit bang on YR1 / 1HR1 and if you didn't have a sell order in it was still clear rejection the next day to take gains from add positions off the table.

Now what? Resting period after such a strong move would be common. On the pivot view, holding 1HR1 127.87 would be positive, as would WS1 at 129.03 and overall a favorable reaction to 1H RSI chart oversold. If bonds drop further, it will likely confirm & correspond with stock index rally. If the bond pullback stops about here, then stocks more likely to fail at FebPs and drop back down. 

First, weekly with long term pivots only. The move for 2016 is clear: lift above 1HP, clear YP, lift to 1HR1, pause but no red, comeback, fast move to YR1 / 1HR2 combo, then larger reaction down. Buying was week 1 and 2 above levels, taking some profits last week was recommended. From here maybe 1HR1 can act as support. 

Here's the daily view of the same pivots. 

And here is medium term levels only, without the long term.  1/6 was a very important day. SPY had broken its YP and TLT had jumped above levels. These kinds of days can mean something in the market and sure enough it was time to cut USA longs and buy bonds. 

Here is a daily chart with long term and medium term levels combined, ie yearly, half-year, quarterly and monthly pivot levels. 

Lastly here's the 1 hour chart with weekly and daily levels. Note RSI lowest since 12/30/2015, and first touch of a WS1. A bullish reaction would be not much lower or bounce from here. 

Bonds

Another reason I like pivots so much is that this tool is working on all asset classes: stock indexes and individual stocks (especially higher volume stocks), bonds, currencies and commodities. Let's look at bonds. Depending on your focus you might be looking at TLT, the actual interest rate vehicles like TYX and TNX, or the bond futures ZB and ZN. Let's check them all!

To start here's a weekly chart with long term pivots only (year and half year). After droping sharply in 2013 with the rejection of the 1HP and YP in early May, TLT first recovered a long term pivot level in early 2014 and rallied from there. Eventually it recovered its YP and had a huge run all the way to 1HR2 top in early 2015. Although the YP broke for about 4 weeks, it was able to recover and hold a few more times. 

I point out these histories to understand the long term motion of the market using pivots. TLT started the first week of 2016 with a clear lift from the 1HP. Stocks were looking ugly and this was clearly the only thing that was giving any decent buy signal (except inverse stock ETFs). The next week the 1HP held as support, and jumped above the YP. Although it had a possibly toppy reaction from the 1HR1 in red dots, the YP held as support and as I type TLT will likely close higher. 

Now here's the daily chart view with all pivots. 

Don't say the market didn't give you a chance to get in. There 5 days in early January there TLT was clearly above the Q1P and 1HP combo with the YP much higher as resistance. This was a good risk reward entry because you had 3 pivots all just below as support and the first real resistance considerably higher. 

Let's just say if you are a long term investor without using leverage, I would look at weekly charts once a week on the weekend and focus on the closing bar. This meant a buy after the close of the first week, ie open on 1/11.

If you are going more trades and watching the daily chart, you could have been buying on 1/6 at the close, the first day above 3 pivots. Both could have been adding as the YP held as support although admittedly there was concern with the rejection from the 1HR1. If not adding though, definitely a hold above the YP because you could start thinking YR1 which is much higher. 

Now, more quickly, do the other vehicles confirm these entry and hold decisions? 

TYX below 3 pivots on 1/6 but no clear rejection; some red the next day. 

TNX clear sell bar on 1/6 (ie TLT buy). 

ZB congested for 2 days and clear buy on 1/6 and nice smooth trend up. The only selling was the JanR1 on 1/11 which was quickly answered the next day with a big rally. The discrepancy with the futures is that it already reached its YR1 level were TLT and TYX / TNX are nowhere close to yearly R1 / S1s respectively. This is because the futures aren't looking back for the full year; this is annoying discrepancy of the method but programs are still positioning off these levels. 

ZN also jumped above 3 pivots on 1/6, and you had a chance to buy there or the next few days. 

Back to TLT. TLT already has a high on 1HR1 exact on 1/20 which was the date of the stock low. That is a major resistance level and important to watch. But if the YP continues to hold as support, that is even more bullish because it will mean TLT is above all pivots. Trust me, there is not much to buy right now that is in that category (ie above all pivots). Maybe we will see Q1R2 at 129.80, or even what would surprise everyone is a big bond rally back near the 2015 highs to YR1 area at 134.42.