Below is the rest of my Saturday post as originally written:
We may have just seen the end of the 35-year bull market in US Treasury bonds. While it could poke a slightly higher high on Tuesday, July 5, or even later this quarter, there's a good chance it's done, and a very good chance it's in the process of completing a very large crest to the long-term bond bull market. Some may perceive this as a sudden bursting of a bond bubble. While we can't rule that out, I think it's more likely we'll see bond prices pull back for a while (could play out over months without making a drastic lower low), then retest back toward this summer's levels.
|I wish I knew to whom credit should be given|
for this great image. Found it online and
couldn't see its creator. It's a good one!
|Hourly chart of $TLT may have completed 5 waves up,|
including a final thrust after a triangle.
Although next week's R2 level might still be tested.
But bond prices can have finished at least a small fifth wave into yesterday, July 1 (or next Tuesday, July 5). With negative divergence on the hourly chart, and as you'll see in the daily, weekly and monthly charts below (look especially at the CCI (commodity channel indicator) and ROC (rate of change) indicators), bonds have been on watch for an important crest for literally months now.
Support for 30-yr bond is $166-169;
with even stronger support at $160-$163.
|Daily chart of the 30-year bonds index $USB|
(similar to the futures contract $ZB_f) shows
some negative divergence as it's been reaching
Fibonacci and inverse H&S targets.
On a weekly chart of the 30-year US bonds index $USB, I drew trendlines about four years ago, and recently extended them. Price actually jumped above the upper one; I'm guessing that may represent a blow-off into this important time window. Notice that this also corresponds to the yearly "R2" resistance level for 2016, another reason to expect price to stall or crest and top out here.
The last two charts are monthly views of this 30-year bonds index $USB. I'm thinking price will work its way down, possibly over several months, then come back up to retest near the high - but may not exceed the $170-$172 level that should be resistance by then. After all that occurs--possibly (early) next year--that's more likely to be the time when sharp drops in bond prices and a real uptrend in yields should occur. it will be interesting to see how financial markets shift, especially after the retest I described, once the trend change becomes apparent. After 35 years of declining bond rates, a prolonged period of rising rates could bring some inflation, and some consider a stronger dollar too. I won't try to get into predictions about that here, especially since higher rates can have a depressing effect on some assets like real estate that are typically financed with debt. But it is pretty easy to foresee troubling consequences for government debt--both the ability to issue new (and rollover) debt, and the need to allocate more taxpayer monies toward interest payments.