Summary
- Bond market has been manic of late and quite overlapping.
- At this point in time, we are seeing a bullish set up taking shape.
- The parameters I am presenting for this bullish set up are quite tight.
- This idea was discussed in more depth with members of my private investing community, The Market Pinball Wizard. Get started today »
With the bond market moving in a manic manner over the last several months, it has really made it difficult to be able to determine where the next high probability move will develop. At this time, I think I have spotted another higher probability set up.
Before I move into my current perspective on TLT, I would like to take a moment to review how we have done in TLT over the last several years.
Let me take a moment to recap my recent history and perspective on bonds. For those that followed our work over the years, you would know that we called for a top to the bond market on June 27, 2016, with the market striking its highs within a week of our call. Right after that top call, TLT dropped 22%, until we saw the bottoming structure develop in late 2018.So, in November of 2018, I noted to my subscribers that I was going long TLT just as it broke below the 113 level. At the time, many were telling me that I was crazy to go long bonds, as the Fed was still raising rates. The main reason many thought I was crazy was that “you cannot fight the Fed.”Well, in my case, I recognized that the Fed cannot fight the market. And, the market was suggesting to me that it was bottoming out and about to turn up quite strongly. In fact, back in the fall of 2018, we set our minimum target for this rally at the 135/136 region. As the market rally developed in structure, we began to look towards the 139/140 region. And, when the market struck the 140 region, I took my profits on the longs we entered at 112/113.Admittedly, I did not capture the further rally in TLT from 140 to 149. But, I also recognize that I will never be able to capture every point the market offers. So, I was quite satisfied with banking the gains we earned from 113 to 140. And, for those that may not realize it, I raised cash when the stock market broke below the 2880SPX region last year, and placed that money into TLT.
At this point in time, I see the potential for another rally in TLT pointing us to the 151+ region. And, I have rather tight parameters for this potential.
Currently, support is 136.31. As long as we remain over that level, I see a nice set up pointing us to 151+. Most importantly, resistance will next reside in the 139.93 region, and should we be able to move towards that level in the coming weeks, then you can raise stops on any longs to 141. As long as the market then holds over 141 on all pullbacks at that time, we are likely pointing up to 151, and potentially even higher over the coming months.
Any failure of this set up will likely point us down towards the 125 region in the TLT over the coming months.
While I am unable to provide you certainty when it comes to the markets, we have done rather well over the years in identifying higher probability movements in the markets we track. The one outlined above on TLT provides rather tight parameters for those who trade the TLT.
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Ideally what we want to see is when price hits the monthly demand it coincides with the equity markets reversing to the downside.