Trade Idea – Bond Market Overextended

The Bond market has been hot of late and is showing us a new bullish Weekly Cycle is already in play.  Several months of declines and consolidation, along with a more hawkish FED, have many believing that the great bond bull market is very much past its prime.  But I wouldn’t count the bond market out yet, not this late in the business Cycle. And in the shorter term, the current action is very bullish.

As a trade opportunity, this recent bullish move is very much extended. This rally is overbought and we’re seeing the technical indicators turn over here because the next Daily Cycle Low (Every 22-26 days) is well past its due date. As bonds formed a Swing High earlier in the week, the bond market has started its decline and should drop below the 10dma and break the rising trend-line. Watch for a fast 3 to 5 session move lower to setup the next Cycle Low.

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