A little over a month ago, we wrote about a pending reversal higher for Treasury Bonds. At the time, we highlighted the base that treasury bonds were establishing – one that would allow them to move upward into the end of the year (higher prices / lower yields). We also noted that the upward move is likely to be choppy.
In the wake of last week’s FOMC meeting, 30-year treasury bonds bounced modestly from the top of the support area that our subscribers have been watching, between 149^26 and 152^03.
We believe that the current bounce will go higher, but it is also important to note that they could test that support area again.
Since treasury bonds appear to be near the completion of a diagonal pattern on a larger scale, the next move higher (into upward targets) should reflect less certainty than was seen during 2014. The pattern on the charts is the fingerprint of market sentiment, and the structure that typically goes with uncertainty before a reversal is an Elliott wave ending diagonal pattern. Thus we expect to see a five-wave overlapping move from the low earlier in 2015, eventually taking price near the Fibonacci price targets of 164^02 or 167^13.
30 Year Treasury Bond Futures Chart
The 45-week cycle in bond prices suggests a coming inflection near the end of 2015, which we believe will translate into a lasting high for treasury bonds. Short-term traders might consider riding the rallies until the cycle peaks, but they should be mindful of the rickety nature of the beams holding this roller coaster up. Longer-term traders and investors should look for opportunities to position for lower bond prices and higher interest rates going into 2016 and beyond.
Equity and bond markets are becoming quite interesting this season. You can also follow TOTM on Facebook to get timely market updates and announcements on subscriber specials.
Thanks for reading.
Twitter: Â @TradingOnMark
No position in any of the mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
