Spotting a "Tired" Look in the U.S. Long Bond
Are U.S. government bond prices really driven by global economic fears?
by Bob Stokes
Updated: September 17, 2019
Has anyone ever said to you: "You look tired"?
Try as you might to look chipper, the signs that you could use some rest slip through.
The same applies to financial markets. An experienced analyst can often spot when a rally looks exhausted. Today, that market appears to be 30-year U.S. Treasury Bonds.
But first, let's go back about a month to when the U.S. long bond was still charging full-speed ahead.
On Aug. 15, a major financial publication noted (Barron's):
The 30-year Treasury yield touched a record low below 2% early [Aug. 15], the latest milestone in a government-bond rally fueled by concerns about the global economy.
As you know, bond yields and prices move inversely to each other, and the widespread sentiment at the time was that yields might very well drop further, which would mean higher bond prices.
Well, less than two weeks later, despite those "concerns about the global economy," our Aug. 28 U.S. Short Term Update looked at the Elliott wave picture in bonds, showed subscribers this chart [wave labels available to subscribers] and said:
[U.S. Treasury long bond futures] rallied to 167^18.0 intraday, exceeding by a few ticks the high on Monday. Five's and ten's did not confirm the long-bond high, which coincided with a new all-time low in long-bond yields at 1.904%. Today's close was a single tick above yesterday's close. The rally in bond prices looks tired.
Indeed, the very day that our U.S. Short Term Update editor titled a chart "The Bond Rally is Ending", that's exactly what happened.
This is a chart [wave labels available to subscribers] from our Sept. 13 Short Term Update, which said:
[U.S. Treasury long bond futures] are tracing out [an Elliott] wave decline from the 167^18.0 top on August 28. This wave has drawn prices to 157^18.0, meeting the bottom trendline of the channel formed by the advance from March.
That issue goes on to give subscribers price targets for the U.S. long bond.
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Here's How Stock Market Tops Have Always Formed
Many stock market observers believe that a bull market ends with an upside price burst -- or what is termed a "blowoff."
History has shown otherwise.
A classic Elliott Wave Theorist mentions that stock market tops have always formed in conjunction with a loss of upside momentum and adds:
Even in 1929 the market did not blow off; the rise that year was slower than the market’s rise in the second half of 1928.
Now is the time to learn what momentum indicators are revealing about stocks here in 2019.
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