Remaining Positions Closed
Chart Updated on 10.13.14
Today, we’ve completely closed out our 6-7 months position-trading positions; this was our core positions and we were very satisfied with the run we’ve had since the late March. We’ve had another day of push from the bulls today on the 20+ Year Treasury Bond as the equities continue to tank, but this might be the top as I have illustrated the reasoning in this post. What makes me most nervous about this chart is that, since mid September, we’ve had one month of straight-up bullish move without putting in any kind of higher-lows. That tells me, this recent trend is actually vulnerable as it is hitting this rising-channel resistance. We still believe that the Bonds got much higher move in-stored but I do think steep decline might be on its way before we see that happening.
Last Friday (10/10/14), around noon time (CT), we have decided to close most of our major-positions that we have been holding since late March as we think this might be the level where the Treasury Bond might start to form some kind of channel or wide-range of consolidation-form moving sideways for a while. We have came to this conclusion looking at the equity indices such as S&P 500 as they might be forming topping pattern along with Russell 2000. This generally means a huge spike might be in-stored for the 20 Year Treasury Bond, but before it gets there, I do think primary-term volatility might be on its way.
We still do think Treasury Bond bulls are not done yet and our long-term targets remain the same (see chart end of this article). But this was the level we felt comfortable to take the winnings and wait for next opportunity to accumulate positions because we may get that decline in the intermediate-term. In the primary-term, we do think Treasury Bond will continue to move higher but this might be the level where we might see the intermediate-term top for a while (perhaps waiting on the equity-market to sort things out – see chart below).
[$TLT Daily Charts]
Early to middle September, we saw few weeks of bearish decline on the Treasury Bond, this was the analysis we did and concluded that this was a potential-level for the bottom in that decline as we have discovered that we are at a ‘oversold status’ in our indicator along with reversal candlestick formations. Also, not mentioning the fact that we are still making higher-lows and higher-highs (purple annotations) which means this was still the territory for a potential higher-low.
That was precisely how it played out and we ‘V’ shaped higher. Currently, the indicator is showing ‘overbought status’ so we may see some struggling price-action in the near-term, but the primary-term uptrend is well established and seems to be strong as of today.
Progress So Far
[$TLT Daily Charts]
This was our setup analysis back in late March.
Since then, primary-term uptrend is well developed and still cultivating with higher-lows and higher-highs in-tact.
Back in mid July, broken above this downtrend resistance.
October 1st, we’ve formed hammer bullish-reversal candle right on that weekly 100SMA (as you can see, this weekly 100SMA has been served as strong pivot since April 2013). Like any other candlestick analysis, we needed to see a follow through in the coming weeks.
And we definitely saw that follow through last 3 weeks right on that weekly 100SMA, inaugurated with that bullish reversal candle.
Long-term analysis using monthly chart along with the indicator. As we have potential “buying” signal with that indicator cross, and the price action (see the arrow) staying above recent pivot, this was a good level to initiate positions.
As you can see, since then, indicator has moved up well while the price action along confirming that move.
Today, the indicator getting into the ‘overbought’ territory (does not mean it must roll-over), we may see some sideways movement for sometime with primary-term volatility forming with some kind of wide-range channel as I have mentioned earlier in this post. Definitely, I do not think this is the level to get into long positions (for longer term trades), but waiting for a the pullback might be the prudent decision, and that’s precisely what we are doing, currently. Bulls had fantastic move last 9-10months. They might want to rest before continuing higher.
[$TLT Weekly Chart – Screened on 8/16/14]
Yes, we still do believe that the Treasury Bond can truly launch to above $130, $140, even $160s, but that probably not going to happen without the equity market’s correction. We’ve seen the Russell 2000 showing massive weakness with that topping signal and also S&P 500 with recent weakness. But we know that this equity-market isn’t going to top out that easily, especially, after a prolonged uptrend it has been in. It’s going to take time so I wouldn’t be hasty on the conclusion of the equity-market top today. If you’ve been following our blog, we have been talking about it on our recent videos. In the event that we get more tangible data that this market is surely rolling-over, we will be ready to get back in to the Treasury Bond for that launch and also potentially get ready to short this market as well.