I turn dials and fiddle with knobs to hone in on harmonic rotations
Joined Oct 26, 2011
4,121 Blog Posts

Resilient Bond Bulls Take Thrust Formation

I’ve been positioned short long term treasuries for many weeks via TBT, riding through a reverse split and three gyrations of waning momentum to the downside.  The correction beginning in the late summer had two very promising rotations downward, but since then has failed to make new lows.  Worse yet, when we take our view out to a weekly chart, it looks like we may have experienced a false breakdown.  Oftentimes the most violent moves occur after a highly visible chart pattern fails to fruit.

There have been calls for a generational trade in shorting the risk averse bonds.  A short bias has even been touted as the trade of the decade.  Many of the methods for obtaining bearish positioning on bonds contain elements of decay.  This decay has been eating away at the bears for quite some time.  Looking at the zoomed out weekly chart, you can see the correction has been mostly time-based.  This is die slow action for any decaying bearish position:

Be prepared for the possibility of new highs in the bonds.

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