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Bond Sentiment Extreme near a Cycle Turning Point

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Bond Sentiment will lead to a Cycle Turn

The Bond market has obviously been in a strong rally since the April Investor Cycle Low (ICL).  History teaches, however, that even during solid bull market moves, corrections into major Cycle Lows are a normal part of the Cycle flow process.

And this is where we find Bonds today.  The Commitment of Traders report shows a massive Long speculative position, while overall Bond Sentiment remains sky-high.  Weekly Cycle timing is well into its topping range, and the 4th Daily Cycle (shown below) is beginning to struggle.  I would never count Bonds out, at least until we see a failed Daily Cycle, but I am starting to believe that a new down leg in Bonds is almost upon us.

A technical caution – if price were to move higher and exceed the current day 6 high, a bullish continuation is possible.  For the bulls, loss of the 10-day moving average would be extremely negative, as it would signal a potential downturn and Left Translated Daily Cycle.

 

Bond Sentiment - The Financial Tap $TLT

 

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Trade Idea – Bond Market Overextended

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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.

 
Financial Tap Bond market trade idea $TLT

 

The Financial Tap publishes two member reports per week, a weekly premium report and a midweek market update report. The reports cover the movements and trading opportunities of the Gold, S&P, Oil, $USD, US Bond’s, and Natural Gas Cycles. Along with these reports, members enjoy access to two different portfolios and trade alerts. Both portfolios trade on varying time-frames (from days, weeks, to months), there is a portfolio to suit all member preferences.

You’re just 1 minute away from profitable trades! please visit: https://thefinancialtap.com

Cycle Chart Setup – Bonds

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Up until last Friday, the decline shown in the bond market was anticipated because the next logical Cycle Low was due. The ebb & flow nature of the bond Cycles are very visible, clear, and well defined on the chart below. And in a bull market trend, this type of pattern makes it relatively easy for us to predict both the top and low of each Cycle.

But the bond market sell-off has intensified this week, to the point where the expected Daily Cycle Low should have been comfortably behind us by now. The extent of this sell-off is approaching levels normally reserved and experienced during the deeper Investor Cycle Low, and each of those past Investor Cycle Low’s have led to some pretty substantial gains.

I doubt that’s what is occurring here, I still favor a standard Daily Cycle Low here that is likely to produce at least a powerful counter-trend rally. I say counter trend because the worst case scenario is that this coming Daily Cycle rally forms a double top before turning lower towards a true Investor Cycle Low.  Regardless, a rally is forthcoming and we know  in any bull market uptrend, the dips should be bought.

 

Feb 12th Bond market DCL

The Financial Tap publishes two member reports per week, a weekly premium report and a midweek market update report. The reports cover the movements and trading opportunities of the Gold, S&P, Oil, $USD, US Bond’s, and Natural Gas Cycles. Along with these reports, members enjoy access to two different portfolios and trade alerts. Both portfolios trade on varying time-frames (from days, weeks, to months), there is a portfolio to suit all member preferences.

You’re just 1 minute away from profitable trades! please visit: https://thefinancialtap.com

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