Friday, July 8, 2016

Update: Is this Bearish Butterfly NOW the end of the 35-year bond bull?

Since I wrote a post last weekend, "End of the 35-year bond bull market as we know it?" - at - U.U. Treasury bonds stalled only briefly and then continued up into this afternoon.  I checked the Fibonacci extension in the 30-year bonds index $USB because it went past the 1.382% extension level I'd expected.  I found that the long bond closed just 21 pennies short of the $176.27 that would culminate a "bearish butterfly" Fibonacci-based pattern.  That pattern doesn't require a trend reversal or even a pullback, but has a good likelihood of doing one or the other.

An hourly chart of $TLT shows how it maintained the current uptrend channel this week.  Breaking down from this uptrend channel (marked with blue lines) would likely indicate a turn or even the beginning of the long-awaited trend change.

Here's a weekly chart that I first set up tracking a head and shoulders that formed when the long bond reached $150, and many thought it crested out there.  Eventually it dropped to a 78.6% retracement to its prior low, then started back up again.  It reached a 1.382% extension at $160-$163, and then yet another at $170-$172 -- and now the 1.618% extension of its 2015 range at $176.27 (at least, closed 21 cents away from that on July 8, 2016).

The next chart is a closeup of the updated monthly view of the 30-year bonds index $USB (which prices similarly to although not exactly the same as the futures $ZB_f), also noting the $127.27 level that has just been virtually tested (or may be tested on a closing basis soon).

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