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:
I’ve said a couple of times earlier this year that there was a decent chance that the entire move up on bonds in 2014 would be retraced in 2015, and we are still looking for that here. I’m showing how that may well play out on the TYX chart below. Obviously this is the 30yr treasury yields chart and yields move inversely to bonds, so the big rally in bond yields shown is a very serious decline on the 30yr treasuries. On the chart below TYX has been in a very big falling wedge cum descending triangle pattern since 2007, and within that pattern an IHS is forming that on a break up would target 42, with a possible fail area at 40.
These are bold projections and it may not play out this way, but this is the highest probability scenario in our view, and I’m expecting this to play out.
This post is taken from my new swing trader collaboration blog with Stan Nabozny at www.theartofchart.net.