Bonds Bounce Back

Bonds regained the 10 day MA on Thursday.

Wednesday was day 15 for the daily bond cycle. Bonds will need to break above the day 6 high of 150.40 in order to shift the odds towards a right translated daily cycle formation.  That aligns with bonds being in a daily uptrend.  Bonds will remain in their daily uptrend unless they close below the lower daily cycle band. 

Bullish Reversal

Stocks printed a huge bullish reversal on Tuesday.

Stocks had a huge day, gaining nearly 5% on the day. There are bullish divergences on the oscillators which we often see at cycle lows. Tuesday was only day 26 for the daily equity cycle, which is early to expect a daily cycle low. But given the extreme sentiment I think that it is possible that stocks printed an early daily cycle low, which may also turn out to be their intermediate cycle low. We need to see a swing low and a close above the declining trend line to confirm the new daily cycle. Since Stocks did print a lower low on Tuesday, the earliest that a swing low can form would be on Wednesday. But for those with a higher risk tolerance that do not want to wait on a trend line break can enter long positions now with a stop place below Tuesday’s low.

Bonds seem to be confirming the daily cycle low for stocks.

Bonds have been trading inversely to stocks recently. Bonds peaked on Monday and formed a swing high on Tuesday. Where stocks closed almost 5% higher on Tuesday, bonds closed over 5% lower on Tuesday to signal their daily cycle decline. Bonds should go on to break below the blue trend line in order to complete their daily cycle decline.

Bonds Waiting on Confirmation

Bonds formed a daily swing low on Thursday.

Bonds printed their lowest point on Wednesday, follow the day 19 peak. Wednesday was day 33, which places bonds late in their timing band for a daily cycle low. So Thursday’s swing low has good odds of marking the DCL. A break above the declining trend line will confirm the new daily cycle.

Are Bonds Ready For A Rebound ?

Bonds formed a daily swing low on Thursday.

Bonds printed their lowest point on Wednesday, follow the day 19 peak. Wednesday was day 33, which places bonds late in their timing band for a daily cycle low. So Thursday’s swing low has good odds of marking the DCL. A break above the declining trend line will confirm the new daily cycle.

Bonds broke above long term resistance in late March. The decline into the pending DCL has caused bonds to back test the resistance level. Bonds are currently forming a bullish weekly reversal off of the weekly trend line. A close back above the long term resistance level should result in a trending move.

Stocks Caught in a Squeeze Play

On Monday we discussed how stocks needed to break below their previous daily cycle low of 2532.69 in order to complete their intermediate cycle decline. And that by closing below the 200 day MA signaled that stocks were continuing their intermediate cycle decline.

Stocks reversed on Tuesday and regained the 200 day MA.

Regaining the 200 day MA places stocks in a squeeze play between the 200 day MA and the declining 10 day MA. If stocks form a swing low and close above the 10 day MA then will need to label day 34 as the DCL.

Bonds appear to have begun their daily cycle decline.

Tuesday was day 28 for the daily bond cycle. That places bonds in their timing band to seek out a daily cycle low. Therefore Tuesday’s swing high has good odds of marking the daily cycle top. A close below the 10 day MA will signal that the daily cycle is in decline. Then bonds should break below the daily cycle trend line in order to complete its daily cycle decline. Bonds have been closing above the upper daily cycle band signaling that they are in a daily uptrend. If bonds form a swing low above the lower daily cycle band then they will remain in their daily uptrend.

Bonds Break Lower

Bonds lost the 50 day MA on Tuesday.

Not only did bonds lose the 50 day MA, they also closed below the lower daily cycle band to confirm the daily cycle decline. Tuesday was day 12 for the daily bond cycle. The peak on day 6 assures us of a left translated daily cycle formation. A break below the previous daily cycle low of 123.69 will form another failed daily cycle confirming the continuation of the intermediate cycle decline. And with bonds on only day 12 for their daily cycle, they could trend lower for the next 5 to 10 days before printing their DCL.

Gravitational Pull on Bonds

Bonds formed a swing high on Monday. They delivered bearish follow through on Tuesday by closing below the daily cycle trend line to confirm the daily cycle decline.

Tuesday was day 13 for the daily bond cycle. That places bonds 5 days shy of its timing band for a daily cycle low. So while a peak on day 11 starts to shift the odds towards a right translated daily cycle formation, I believe that there something more sinister is afoot. I suspect that bonds are beginning to feel the gravitational pull of a larger degree correction.

The long term weekly charts shows a multi-year resistance zone at the 128-129 level. And this week bonds are being rejected by the multi-year resistance zone. So this is setting up to be a longer bearish move. Which I plan to cover in Wednesday’s Mid-Week Update.

Beware Bonds

Bonds finally appear to have confirmed a new daily cycle.

Bonds printed their lowest point last Friday. That was day 12, which is usually too early for a daily cycle low. However bonds have now:
* Broke above the declining trend line
* Delivered a bullish zero line crossover on the TSI
* Closed above the lower daily cycle band
* Closed above the 10 day MA
* Managed to turn the 10 day MA higher.

All of which convinces me that day 12 hosted the DCL.

The bigger picture is that bonds are in their timing band for a yearly cycle low and are in an interemdiate cycle decline.

Bonds have formed a monthly swing high in October. A monthly swing high is required for the yearly cycle decline. Bonds will need to deliver some bearish follow through to confirm that the yearly cycle is in decline.

Bonds are already in a daily downtrend. If the yearly cycle decline has begun then I suspect that we will see bonds backtest the 50 day MA and then rollover into another left translated daily failed cycle in order to complete the yearly cycle decline.

Bonds Bear Witness to Bearish Cycle

On September 19 we discussed that bonds were beginning to become bearish. On Wednesday, bonds confirmed a bearish cycle.

Bonds printed an extended daily cycle low last Wednesday. Bonds formed a swing low the next day and then closed above the declining 10 day MA on Monday to confirm that day 38 hosted the DCL. Bonds closed lower on Tuesday and then broke below the previous daily cycle low on Wed to form a failed daily cycle. Since Wed was only day 5 bonds could potentially go lower for the next 2 – 4 weeks before printing a daily cycle low.

Bonds have begun to close below the lower daily cycle band to establish a daily downtrend. Bonds will continue in their daily downtrend until they close above the upper daily cycle band.
weekly

Bonds are delivering bearish follow through to last week’s break of the weekly trend line. This confirms that bonds are in an intermediate cycle decline. At 12 weeks bonds could trend lower for another 6 – 8 weeks before printing their ICL

Bonds Beginning to Become Bearish

The daily bond cycle peaked on day 29. A swing high formed two days later. Then bonds broke below the daily cycle trend line on day 32 to confirm the daily cycle decline.

Bonds formed a swing low last Thursday off the day 33 candle. Since 33 days places bonds deep in their timing band for a daily cycle low that swing low had good odds of marking the daily cycle low.

However, bonds broke lower.

Bonds delivered a bearish signal last week when they failed to follow through on a swing low deep in the timing band for a daily cycle low. Bonds delivered another bearish signal on Tuesday by closing below the lower daily cycle band. That ends the daily uptrend and indicates that bonds have begun their intermediate cycle decline.

Looking at the weekly chart we can see that bonds formed a weekly swing high last week. Bonds are delivering bearish follow through this week. Bonds also broke below the weekly trend line which is another signal that the intermediate cycle decline has begun.

A failed daily cycle normally ushers in the intermediate cycle low. Since the current daily cycle peaked on day 29, that locks in a right translated daily cycle formation. Bonds should begin a new daily cycle any day. Bonds will need for the new daily cycle to form as a left translated, failed daily cycle in order to complete the intermediate bond decline.