Bonds update via TLT - U.S. bonds continuing downtrend

Recently we outlined bearish prospects for US Treasury bonds and notes, with a comment about selling rallies. Today we're seeing good followthrough, as the last few days showed a sideways consolidation type of movement (which should have helped anyone setting such a bearish position). The basic thought was that we may expect C=A pullback target levels in $USB and $UST (Treasury bonds and notes, respectively). Here's an intraday chart right now of TLT, the ETF that tracks Treasury bonds (intraday view of the daily chart, at right). If we apply a C=A target for it, we get a level of $86.25. Interestingly, that looks about where the 200-week moving average is aiming (see the weekly chart below).

I had also made a comment about the possibility of TLT remaining above a range of $91 to $92 (perhaps specifically approximately $91.70) - that would be based upon its monthly moving averages. It's further based upon the idea of cycle timing in bonds. So I'll be keeping an eye on, to see whether TLT actually gets support at or just under $92. Ways I'll look for that will include a combination of the indicators, and of course whether or not TLT exhibits a day that closes above the high of the prior day after getting down toward that level. It's important to note that if TLT, as well as Treasury bonds and notes, fall under a level such as the 25-month moving average, then that would be much more bearish for bonds and the cycle top as well as the downtrend would be of a larger level.

A similar way to judge how serious a downtrend is, will be whether or not the C=A symmetry target is exceeded to the downside. Sure - I can already see that this level in TLT might go below the monthly moving average level I mentioned above, for TLT. But when I checked it before, as I was posting about the underlying symbols, $USB and $UST, the C=A symmetry targets would not move under the monthly MA levels that would indicate a deeper cyclic correction. Therefore, it looks to me like we can keep in mind the C=A symmetry levels for this pullback in bonds, and only consider bonds to be in deeper trouble if they continue trending below such symmetry levels.

Once bonds do find a level of support (and let's not rush that but let this play out first), there will be some asking whether bonds can once again move to new all-time highs. As I stated in my prior post on bonds - I doubt it. The chart damage that's being done, and the fundamentals of course, tell us that it would not be realistic to expect U.S. Treasury bonds or notes to move to new all-time highs. Therefore, I cannot support the idea of expecting the interest rates on U.S. Treasury bonds or notes to move to new all-time lows.

This may have some interesting implications for Kondratieff deflation wave analysis. But it's beyond the scope of this post to address those; other than to point out that there are deflation scenarios in which such interest rates can remain at somewhat elevated levels.

A weekly chart of TLT is below, on which you can see that 200-week moving average level that looks like it will converge with a C=A symmetry objective.