A friend has reminded me that the TLT (U.S. 20-year Treasury bond ETF) reached a significant Fibonacci retrace up (at or just about at the .618 retrace back to the highs), meaning that this could be the time to short bonds (such as with the TBT exchange-traded fund). Well, I had hoped that I'd have this weekend to examine the Fibonacci levels, so for now all I can do is describe the bull vs. bear case in bonds now:
1. Bear case - bonds have topped, had their initial drop down, retraced to a wave 2 or B level (which the .618 retrace can be), and now ready to drop sharply. If right, this will show up quickly in losing the 200-hour moving average I mentioned yesterday, as well as the channel trendlines and prior Elliott Wave internal fourth wave (meaning a drop by TLT under 109).
2. Bull case - bonds have one higher level to reach, and the move up from TLT at about 111-113 was the first move up in a topping pattern (perhaps a diagonal) that has yet to finish playing out. If this is right, then TLT is unlikely to drop under the channel trendline support and also unlikely to drop under 109.
I'll examine this in more detail this weekend. Meantime, a trader could exit a short-term trading long position based on the hourly chart, and/or speculate into a short position now with a stop loss at yesterday's highs.
Good luck out there, be careful all and happy trading!
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