Saturday, April 6, 2013
Are US Treasury Bonds getting ready to flash crash?
Are US Treasury bonds moving into position for a flash crash? This sobering possibility is starting to look realistic, based on the charts and technicals. Yesterday's spike flight to safety as equity markets fell hard early Friday morning was accompanied by a fascinating mix of capitulation and high-volume moves into high-probability resistance. We'll review the charts, including the possible paths that trading may take the US long bond. First the popular ETF for the US long bond, TLT (this and all the charts here were made using Stockcharts.com). It made a huge jump Friday with a candle sometimes called a spinning top, closing lower than most of the day's price range. You'll also see it landed right in a volume-price resistance zone, and a price area that easily can form the right shoulder of a bearish head-and-shoulders (H&S) pattern. Maybe the right shoulder will take some days or a few weeks to play out - yet it's also possible Friday's spike may double as an island reversal. If next week's price movements leave it isolated by an "air pocket" down, it'll look like an island reversal.
Posted by Ariel at 12:46 PM