The bond market is breaking, and so let’s take a look.
Week in, week out, we want to ask, “It’s got to be over, right?” But it keeps going. And my last look at $TLT (here) has been a flop and so let’s look again now. That article was almost a month ago, and I had great fibs and a good count for a bottom. But no bottom formed.
Looking at yields, we see two things:
- The giant inverse H&S
- And a multi-decade trend line
Now, regarding those,
- The measured move of the inverse has long since been met (that was to about 3.24%)
- And that trend line breakout looks like it might be genuine
What can this mean? This has become like Tesla in 2020. Everyday, it was like, ok, haha, it’s topping here. And it didn’t. Fucking thing kept going. And maybe this is in a huge markup (i.e., bond markdown) that goes and goes and goes and goes. Like it’s in a 3rd of a 3rd of a 3rd wave or something. I don’t know.
It’s ridiculous. I would think it would stop soon. I mean, but golly. I do know this: I don’t see any fibs here, like here today-ish. And if the trend line breakout is telling us the bond bull market is over, then we are in a new world. Only some fairly elderly men around were actually trading in the last bond bear market, and it was at the end of it. None of us (anyone under 60 or so) has really experienced that. But it should mean things will be different for a while, and maybe that’s not so good for things like tech stocks, which have thrived in the low interest rate environment. Not sure.
But let’s look at the fibs.
I don’t know if we should count it as an impulse wave or as a corrective wave, but for this exercise it won’t matter. We just need to find a fib to see if the ascent will at least pause somewhere.
If we count it as an A-B-C (in pink), like this:
The next fib is at 4.87%, a 16% increase from here. That’s still sort of far away.
But maybe we should count it like this:
The next fib is at 4.55%, about 8% more to go. Not as bad, but until we strike a fib relationship of some kind, I don’t think we’re there yet.
And pausing (or topping) only solves a hypothetical problem for us: that hypothesis is: if yields top, inflation will have topped, and the Fed will pause or pivot, and we can buy stocks again.
But there is another side to it: if bonds are to reacquire their safehaven status, it doesn’t necessarily mean we’re bullish on equities. For all we know, we do this terrible thing and bonds get the bid for a very different reason.
So, at any rate, it’s possible that bonds will bottom soon, and yields top soon(ish), but I would like at least one of these fibs to be struck first.
Note: When articles are first posted, most of them are made available only to my Patreon supporters (I do try to publish some public posts on occasion). Over time (usually after a period of a few weeks or so), I make all of the work public. To gain access to my work when it is produced, please consider becoming a patron. More information may be found on my About page and on my Patreon page. In a nutshell, patrons of any denomination (you get to pick the amount) will be able to read my weekend analyses, Tier 1 members ($20/mo.) get access to all of the articles I write, and Tier 2 members ($35/mo.) get access to those, plus counts on other instruments and my Discord chatroom.