In Tuesday’s Are Bonds Setting a Bear Trap? — Update, we noted that TLT had confirmed a Day 35 Daily Cycle Low. The rally had also produced a Weekly swing low, providing the first evidence that a more significant cycle turn could be developing.
The question was whether the rally could gain enough traction to reinforce that developing Weekly reversal.
We are beginning to see that follow-through.
The long-term chart puts the recent recovery into perspective. Bonds extended their multi-year decline into Month 36, deep in the timing band for a multi-year cycle low. The potential for a significant turn was already developing before price began to recover.
The shorter-term chart now shows how that recovery is progressing.
Wednesday’s close above the 10-day MA was followed by Thursday’s close above the upper Daily Cycle Band, signaling a Daily uptrend.
These are encouraging developments following the confirmed DCL. TLT is now approaching its declining 50-day MA, which represents the next important test.
The confirmed DCL, Weekly swing low, and improving Daily price behavior are adding support to the possibility of a more significant reversal. However, the Intermediate, Yearly, and multi-year cycle lows remain unconfirmed.
The Takeaway
Cycle timing identified where to anticipate a potential turning point. The subsequent price behavior is now reinforcing that expectation.
Bonds are taking their first steps toward a potentially significant reversal. Whether those steps develop into a sustained advance will depend on the price behavior that follows.
I’ll explore the potential longer-term implications of a significant turn in Bonds in this weekend’s Subscriber Weekend Report.
In the meantime, here’s a hint of what I’ll be watching.
Leave a Reply