Here’s a Thought for You on High Yield Debt and What I Think It’s Not Telling Us to Do Yet

So, I look at lots of risk signals, and I love watching $JNK. Toward the top of the market, I was warning of caution partly because of how high yield debt was performing relative to equities (e.g., here, here). And that turned out to be prudent as we sort of fell apart. But as we continued to fall, and as we’ve entered this range, I’m not entirely concerned now because of many things I’ve discussed before (e,g, here, here). And that is despite junk bonds continuing to look like total trash here.

So here’s the thinking on this:

  • I have a lot of signals that look ok
  • Junk bonds look completely awful

What am I to do? Am I to assume that junk bonds are telling the truth and that everything else is misleading us? Or am I to conclude that the majority of evidence points to not such a bad risk off environment (no crash, no bear market—at least not yet)? And if the latter, then how do I explain junk bonds?

And so here is how I am going to try to explain that. You see, as a refresher—and to save you a ticker lookup—$JNK does look like total shit here:

JNK

Read more “Here’s a Thought for You on High Yield Debt and What I Think It’s Not Telling Us to Do Yet”


Note: When my work is first published on this website, it is made available to patrons who support my work through my Patreon account. Over time (usually after a period of a few months), I make 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.


I Am Inclined to Count $ES Bullishly Here

It was prudent to be bearish during the sideways chop we had been in because it culminated in the selloff we just had. That said, it’s important to adapt and reassess.

The very bearish counts need us to move much lower and much faster. In other words, if this were a one down two up, we should be in a third wave down and I feel like we would all know it. Looking at it as it stands, there is a way to count the advance as an impulse wave (the orange 4 of the blue 1 is a bit big compared to the 2, but not too terribly so), and looking at the proportions of the selloff, it has the “look” of a 3-wave move. And: it came right to the 50-61.8% retracement of the prior advance, so all of this—barring another selloff—is an excellent setup for a 1-2 pump.

Couple this with some of the bullish signals I saw at the low today, the fact that the Nasdaq 100 can be counted as a correction, and there’s a good chance we may move up sharply from here.

Things I would like to see in the coming days: a vast improvement in breadth, at least one high volume green daily bar, and Bitcoin finding its legs.

ES

Read more “I Am Inclined to Count $ES Bullishly Here”


Note: When my work is first published on this website, it is made available to patrons who support my work through my Patreon account. Over time (usually after a period of a few months), I make 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.


$TLT May Support One More Period of Weakness in Equities

My view on $TLT (here) is that it’s embarking on a large 5-wave decline of cycle degree. Today’s weakness is so far supportive of that because the move looks impulsive. But, it’s not going to go under $130 in a straight line. That 5-wave cycle C will of course be composed of it’s own 5-waves (which will each be composed of 5-waves, turtles all the way down). Zooming in, today’s action looks to have completed a 5-wave move. So we may expect a 3-wave counter-trend corrective rally in the direction of the orange box.

This is consistent with my thought that renewed weakness in the equity markets is possible.

TLT


Note: When my work is first published on this website, it is made available to patrons who support my work through my Patreon account. Over time (usually after a period of a few months), I make 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.


$TLT Bear Wedge, Count Looks Corrective

$TLT counts well as a corrective pattern. If this structure breaks down, it may fall below $130.

TLT


Note: When my work is first published on this website, it is made available to patrons who support my work through my Patreon account. Over time (usually after a period of a few months), I make 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.


Long-Term Bond Count Is Really Weird, But May Tell Us Important Future Swings: Let’s Get Svelte with $TLT

Probably the weirdest thing we can do is to try to count $TLT seriously. And that sounds like an invitation so let’s do it.

It’s a strange structure, and looks entirely corrective. And the only way to really do it is sort of like how I had to do the S&P (here) where triangles lead into other triangles. And what that means—essentially—since the price of bonds has gone “up” all these years is that some long past bond uptrend is correcting in some kind of long-term flat. The start of that is some long-past light blue “a” in the bottom left corner. And we’ve been doing the big light blue b ever since. I don’t even want to try this on an actual 40-year bond chart because it’s probably nested all the back like this and it’s very difficult to nest these while also staying sane. 2-3 of them is enough for me.

At any rate, when you untwist the noodle we should be in a 3-wave move down in a (purple) “b” here (or maybe this will become a triangle of its own like the last ones?). And we do look like we’re making a bit of a bear flag. What that should mean is that we should get a 5-wave impulse down for that cycle (yellow) c, followed by a larger 5-wave impulse back up for purple c, followed by an even larger 5-wave impulse down for light blue c in the bottom right. Gawdam. Y’all want to see some volatility?

In other words, we’ve been building all the A’s and B’s for decades, and at some point, we need to finish tying the other side of the bow. So, hmm. I’m guessing at some scenarios on the chart.

TLT


Note: When my work is first published on this website, it is made available to patrons who support my work through my Patreon account. Over time (usually after a period of a few months), I make 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.