Category Archives: Interest

Bonds – A Summer Projection

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I said on Wednesday morning that I was looking for a slightly lower low on TLT before a likely full retracement of the last move down. After that lower low and the wedge breaking up i was wondering whether an IHS might form at the obvious possible IHS neckline at the 50% fib retrace. On the ZB (30yr treasury future) below you can see that ZB reversed on Friday at that 50% fib (TLT reversed a little lower) and if this IHS continues to form then on a break over the neckline the target will be the 100% retracement of the last move down that I was looking for last Wednesday. ZB 60min chart:

150614 ZB 60min IHS Projection

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Interest Rate Rally

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When I pointed out the trendline break interest rates made last week, there was a hail of chortles and catcalls about how useless it was, since it was so “obvious”. There is nothing wrong with an obvious trendline break. Just because you know that more than one person is watching a given technical breakout doesn’t invalidate it.

The naysayers got one day of glory, as interest rates did dip and simply test the breakout the next day, but since then, it’s been up, up, and away. I’d say that the nations of the world, which are countless trillions of dollars in debt, are pretty much screwed and tattooed.

0609-interest

Roaring Interest Rates

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There is no nuance to what I’m going to say: interest rates are pushing higher, and this is going to be a millstone around the neck of the world economy.

Now, the permabulls have been conditioned over the past six phony years to refute any assertion that anything could be bad for the market. Yesterday, for instance, when I snarkily pointed out ETSY’s horrible performance (which, incidentally, is shadowed by today, which has brought the stock to a new lifetime low). one of the more perpetually bullish Slopers remarked that ETSY’s rotten performance was a sign of a healthy bull market.

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A Decent Start

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That was a decent decline yesterday, though ideally bears should have controlled the close and they didn’t. The minimum requirement on all the various sell indicators that I was looking at on Friday and yesterday morning were met as the 15min and 60min sell signals made target, the RSI5/NYMO sell signal made a visual hit just shy of the 30 level at 31.54. That was a very near miss and I’d count that as close enough, so that is effectively made though usually we would see a close under the 30 level and we’ll most likely see one here as well.

In terms of the stats I was looking at on Friday for series of bearish reversal candles the minimum requirement of a 1.65% decline was met yesterday with move of 1.665% from the all time high into yesterday’s low. Of the nine examples that I listed, two reversed back up to retest the high after that decline, of which one continued the previous uptrend, and the other made a marginal new high before a 9.83% decline from that second high. Six continued down without a retest of the high to a median decline of 4.5% to 5% from the high, and an average (mean) decline of 15%. The odds therefore favor continuation down without a retest by three to one. We shall see how far the bulls can rally today.

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Chop Top

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I’ve been doing more work on the series of bearish reversal candles over the last twenty years and have combed through 90% or so of the intervening period. I’ll finish that at the weekend and may do a dedicated post on these. The ones I have found so far are:

1999 Feb – From 2nd candle into 5% decline
2002 Dec – From 2nd candle into 17.3% decline
2004 Dec – From 2nd candle into 4.46% decline, then marginal higher high, then 7.56% decline
2005 Oct – From 2nd candle into 2.08% decline
2005 Nov – Failed and resumed uptrend into December interim high
2005 Dec – From 2nd candle into 4.44% decline
2007 Oct – From 3rd candle into 57.4% decline
2014 May – From 2nd candle into 1.66% decline
2014 Sept – From 2nd candle into 1.65% decline, then marginal higher high, then 9.83% decline
2015 May – To be determined

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