Today's EchoVector Pivot Point Chart And Analysis: The Long Treasury Bond
Aug 5 2013, 12:13 | includes: TLT
Disclosure: I am long TLT. I have a short-term swing trading long position opened in TLT last week. I may add to this position in the coming week, or cover this position, depending on how this coming week's price action progresses.
Treasury long bond prices have seen difficult times recently. Since the beginning of May this year, and shortly after the Federal Reserve hinted it was developing a schedule for winding down its $85 billion per month bond purchasing program, Fed "tapering" speculation hit the bond market hard. It sent the price of bonds down rather quickly and quite dramatically. An 8% drop occurred during just that first month of May, from about $124 to about $114 as measured by the TLT ETF.
Although the Fed has since attempted to mitigate its language and posture to indicate that purchasing will remain steady, the bond market has continued to weaken further. Investors have elected to continue their strong preference for rising stocks. June remained poor for bond prices, seeing The TLT dropped another six points from $114 to $108, and set up an additional early July drop to nearly $106 before the damage to prices seemed to halt.
Many articles followed, with some analysts seeing bonds stabilizing and again "becoming a buy," while other analysts warned of continuing price weakness into the end of the year -- and potentially beyond. On balance, treasury long bond prices did stabilize through much of the remainder of July, finding continued technical support in this new price range.
However, last week's midweek Federal Reserve activity apparently provided little additional lift to bond prices; in fact, bonds broke down to new annual lows the very next day, on Thursday, before ending the week. Thursday's better-than-expected ADM payroll number and ISM manufacturing number also appeared to be catalysts for the breakdown. Friday's worse-than-expected job numbers and further moderating comments by the St. Louis Fed President on Fed tapering helped halt Thursday's strong dire-looking bond price down-pressure and continued downward momentum, at least going into the weekend.
In this context, today is a good day for review of a price chart of the treasury long bond from an EchoVector Pivot Point Analysis Perspective. We're looking for occurrences of possible price symmetries that may be forming within this past week's and month's context, and to review these symmetries' potential trading implications. This coming week is sure to be a significant week in the bond market. In this analysis, I will review two primary EchoVector Pivot Point Perspectives for their price symmetries and for their individual and combined trading implications.
The first echovector perspective is a four-year daily price action chart of the TLT that highlights a current key active presidential cycle echovector and a "fan" of potential echo-extension vectors from a key presidential cycle echo-back-date, for context. The second echovector perspective is a two-year daily price action chart of the TLT that includes a currently active congressional cycle echovector, which may be about to pivot and on which I will be focusing, and several confirming shorter-term cycle echovectors occurring in parallel that are also of interest. I am using the TLT ETF and its price charts as a proxy for long bond treasuries market price action.
TLT ETF Four-Year Daily OHLC
(Right click on image of chart to open image in new tab. Left click on image opens in a new tab to further zoom EchoVector Analysis chart image illustrations and highlights.)
This first chart presents and highlights the key active four-year presidential cycle echovector at work on Thursday, April 23,2103, along with that day's coordinate echo-back-date of Thursday, April 21, 2009. At the time, although many analysts were advancing the position of moving into bonds as an insurance hedge against a possibly overheated stock market, I was instead advancing caution and warning readers of a potential head-and-shoulders pattern in bonds possibly in the making. The wisdom of taking profits on the strong double-long swing trade opportunity alert I had previously issued during week of March 11 was also advanced. In addition, I was suggesting more active bond market participants begin looking into double shorts. This chart highlights the rather overall precarious price pattern of this year in the long bond market within the presidential cycle during its prior period.
A longer-term chart highlighting the eight-year regime change cycle clearly shows the lows of mid-March 2013 and its correlate lows in both 2009 and 2005, as well as, very interestingly, the active coordinate echovector support then each year. The regime change cycle chart also shows the symmetrical price extension levels that occurred and followed in the second quarter of each of those years. They indicate little price advantage going forward into the end either year; in fact, they reveal significant price erosion each of those years instead.
Illustrative charts regarding this additionally revealing longer-term regime change cycle period and its trends, patterns, and echovectors were posted on Seeking Alpha on April 13, and can still be viewed there for "additional context and framework" in viewing, processing, and analyzing this month's coming price action. So far, the price behavior during this current phase of the presidential cycle is behaving very consistently, and coordinately subsumptive to and within this current phase of the eight-year regime change cycle, in which the presidential cycle occurs.
TLT ETF Two-Year Daily OHLC
(Right click on image of chart to open image in new tab. Left click on image opens in a new tab to further zoom EchoVector Analysis chart image illustrations and highlights.)
This second chart zooms in and focuses on price activity and the potentially revealing price symmetries that have occurred in the long bond the last two years. First, notice how the active two-year congressional cycle echovector (in solid yellow) for this past Thursday, Aug. 1, 2013, and its coordinate echo-back-date of Thursday, July 29, 2012, is moving in significant parallel with the active presidential cycle echovector previously highlighted (in both solid white and spaced white). Also note that in both 2011 and in 2012, the week that followed the coordinate echo-back-week to this past week presented strong pivoting and price extension pressure and pattern, following "FOMC comments the prior week."
In 2011, the price reaction to Fed comments was strong price uplift, which was also coordinated with presidential cycle uplift of similar price lower range basing in 2007. In 2012, the price reaction to Fed comments was significant price down-pressure and price fall, prices having already rallied to the upper end of the active longer term echovector price range that year. Also, notice the current price momentum and slope symmetry in the bi-quarterly echovector (two quarters long to the weekday, and highlighted in solid aqua blue) for this year, occurring from Monday, July 22, 2013, and its coordinate echo-back-date of Monday Jan. 22, 2013; see how this echovector so interestingly parallels the longer active annual price echovector for this past week's post low (in spaced red).
Note also that coordinate price weakness followed well into the middle of the following month from the end of July last year, from the end of January this year, and from the end of July this year, and how this strong echovector slope, and channel, presently still appears intact within this price pattern perspective. This annual echovector price pattern perspective and its price action symmetries might serve to argue as evidence for continued price down-pressure bias from a technical echovector perspective, even in the wake of both the active presidential cycle echovector's and the congressional cycle echovector's current strong timing up-biases going forward into this week (and with respect to their potential weights on shorter-term swing trading this year).
We should begin to notice a key pivot in the currently active congressional cycle echovector this week if these longer-term price echoes become mitigated by nearer-term (and subsumptive) annual, bi-quarterly, and quarterly price down-pressures, and statistically significant price divergences in the longer turn cycles and patterns begin to emerge. These divergences do happen, but they tend to be rarer occurrences than consistent echoes with possibly alternative amplitudes. This week will prove very interesting.
Conclusions and Positioning Implications
Remaining nimble may be the key this week. I've mentioned that I plan to look at opportunities to add to a short-term swing trading position in the TLT I opened last week, but I will keep an eye on the annual, bi-annual, and extremely strong quarterly price down-pressures and downward momentums evidenced in the above chart. I will also look for possible continuations in these down-pressures, as well as look for a failure in the price echo (and similar strong price extension) of the two-year congressional cycle echovector, a failure that could result in a dramatic downward pivoting of this echovector as we move through the next two weeks.
I also remain open to closing out my short-term long in these events, and considering a position reversal. A breakout above the downward projection of the downtrending bi-annual echovector (highlighted in solid aqua blue), which also so very interestingly reflects the slope of the currently active annual echovector for last week's (and this year's) price low would be reinforcing and bullish. But even this potential breakout should be viewed within the context of the two (solid blue purple) presidential cycle forward price vectors pointing to the end of the year and the beginning of next year, as measured from this spring's top.
Regarding any long-term short positions that may still be open from that top, I would tend to consider them primarily mature, especially in the short term and at the current level of extension, and to possibly be at risk. Therefore, I would be ready to monitor them closely, and be analyzing their potential cover or continuance within short-term trading considerations.
If you believe the time has come to re-enter the treasury long bond, I suggest using active and adjustable straddling positions to manage your exposure to general price level changes in either direction. Setting advanced management straddles at key coordinate forecast levels is an effective and opportune measure, and advanced trade strategy I think prudent to mention. Such an approach to the bond market at this time could prove very valuable at engaging and effectively managing risk and reward. One way to employ such a straddle would be to utilize the TLT ETF mentioned in this analysis by setting up an advanced trade technology approach (see "On-Off-Through Vector Target Price Switch") to positioning and position management, with appropriate dynamic triggers and stops included -- for example, at $106.50 on the TLT.
To perform the short side of the straddle, set a short trigger below $106.50 on the TLT pre-programmed as a "repeating short trigger switch" at this trigger level on reverse downtick action through the trigger price, with stops set to activate on reverse uptick up-through action. To perform the long side of the straddle, set a long trigger above 106.50 pre-programmed as a "repeating long trigger switch" on reverse uptick action through the trigger, with stops set to activate on reverse downtick down-through action.
I'm hoping the EchoVector Pivot Point Analysis Perspectives provided in this article help lend additional context to your potentially already broad and extensive bond market view and analysis, and that they help you to further sharpen your clarity and insight. I always recommend considering a broad range of considerations, analysis, and approaches when assessing the markets for any investment decision.
Color Code Guide for Charts
- Presidential Cycle EchoVector (Four-Year): Long White
- Congressional Cycle EchoVector (Two-Year, Day of week): Yellow
- Annual Cycle EchoVector (One-Year): Red
- Bi-Quarterly Cycle EchoVector (Six Months): Blue
- Quarterly Cycle EchoVector (Three Months): Grey
- Select Support and/or Resistance Vectors and/or Related Price Extension Vectors (of Varied Lengths): Navy blue and/or Blue Purple
Thanks for reading.
Disclosure: I am long TLT. I have a short-term swing trading long position opened in TLT last week. I may add to this position in the coming week, or cover this position, depending on how this coming week's price action progresses.
Treasury long bond prices have seen difficult times recently. Since the beginning of May this year, and shortly after the Federal Reserve hinted it was developing a schedule for winding down its $85 billion per month bond purchasing program, Fed "tapering" speculation hit the bond market hard. It sent the price of bonds down rather quickly and quite dramatically. An 8% drop occurred during just that first month of May, from about $124 to about $114 as measured by the TLT ETF.
Although the Fed has since attempted to mitigate its language and posture to indicate that purchasing will remain steady, the bond market has continued to weaken further. Investors have elected to continue their strong preference for rising stocks. June remained poor for bond prices, seeing The TLT dropped another six points from $114 to $108, and set up an additional early July drop to nearly $106 before the damage to prices seemed to halt.
Many articles followed, with some analysts seeing bonds stabilizing and again "becoming a buy," while other analysts warned of continuing price weakness into the end of the year -- and potentially beyond. On balance, treasury long bond prices did stabilize through much of the remainder of July, finding continued technical support in this new price range.
However, last week's midweek Federal Reserve activity apparently provided little additional lift to bond prices; in fact, bonds broke down to new annual lows the very next day, on Thursday, before ending the week. Thursday's better-than-expected ADM payroll number and ISM manufacturing number also appeared to be catalysts for the breakdown. Friday's worse-than-expected job numbers and further moderating comments by the St. Louis Fed President on Fed tapering helped halt Thursday's strong dire-looking bond price down-pressure and continued downward momentum, at least going into the weekend.
In this context, today is a good day for review of a price chart of the treasury long bond from an EchoVector Pivot Point Analysis Perspective. We're looking for occurrences of possible price symmetries that may be forming within this past week's and month's context, and to review these symmetries' potential trading implications. This coming week is sure to be a significant week in the bond market. In this analysis, I will review two primary EchoVector Pivot Point Perspectives for their price symmetries and for their individual and combined trading implications.
The first echovector perspective is a four-year daily price action chart of the TLT that highlights a current key active presidential cycle echovector and a "fan" of potential echo-extension vectors from a key presidential cycle echo-back-date, for context. The second echovector perspective is a two-year daily price action chart of the TLT that includes a currently active congressional cycle echovector, which may be about to pivot and on which I will be focusing, and several confirming shorter-term cycle echovectors occurring in parallel that are also of interest. I am using the TLT ETF and its price charts as a proxy for long bond treasuries market price action.
TLT ETF Four-Year Daily OHLC
(Right click on image of chart to open image in new tab. Left click on image opens in a new tab to further zoom EchoVector Analysis chart image illustrations and highlights.)
This first chart presents and highlights the key active four-year presidential cycle echovector at work on Thursday, April 23,2103, along with that day's coordinate echo-back-date of Thursday, April 21, 2009. At the time, although many analysts were advancing the position of moving into bonds as an insurance hedge against a possibly overheated stock market, I was instead advancing caution and warning readers of a potential head-and-shoulders pattern in bonds possibly in the making. The wisdom of taking profits on the strong double-long swing trade opportunity alert I had previously issued during week of March 11 was also advanced. In addition, I was suggesting more active bond market participants begin looking into double shorts. This chart highlights the rather overall precarious price pattern of this year in the long bond market within the presidential cycle during its prior period.
A longer-term chart highlighting the eight-year regime change cycle clearly shows the lows of mid-March 2013 and its correlate lows in both 2009 and 2005, as well as, very interestingly, the active coordinate echovector support then each year. The regime change cycle chart also shows the symmetrical price extension levels that occurred and followed in the second quarter of each of those years. They indicate little price advantage going forward into the end either year; in fact, they reveal significant price erosion each of those years instead.
Illustrative charts regarding this additionally revealing longer-term regime change cycle period and its trends, patterns, and echovectors were posted on Seeking Alpha on April 13, and can still be viewed there for "additional context and framework" in viewing, processing, and analyzing this month's coming price action. So far, the price behavior during this current phase of the presidential cycle is behaving very consistently, and coordinately subsumptive to and within this current phase of the eight-year regime change cycle, in which the presidential cycle occurs.
TLT ETF Two-Year Daily OHLC
(Right click on image of chart to open image in new tab. Left click on image opens in a new tab to further zoom EchoVector Analysis chart image illustrations and highlights.)
This second chart zooms in and focuses on price activity and the potentially revealing price symmetries that have occurred in the long bond the last two years. First, notice how the active two-year congressional cycle echovector (in solid yellow) for this past Thursday, Aug. 1, 2013, and its coordinate echo-back-date of Thursday, July 29, 2012, is moving in significant parallel with the active presidential cycle echovector previously highlighted (in both solid white and spaced white). Also note that in both 2011 and in 2012, the week that followed the coordinate echo-back-week to this past week presented strong pivoting and price extension pressure and pattern, following "FOMC comments the prior week."
In 2011, the price reaction to Fed comments was strong price uplift, which was also coordinated with presidential cycle uplift of similar price lower range basing in 2007. In 2012, the price reaction to Fed comments was significant price down-pressure and price fall, prices having already rallied to the upper end of the active longer term echovector price range that year. Also, notice the current price momentum and slope symmetry in the bi-quarterly echovector (two quarters long to the weekday, and highlighted in solid aqua blue) for this year, occurring from Monday, July 22, 2013, and its coordinate echo-back-date of Monday Jan. 22, 2013; see how this echovector so interestingly parallels the longer active annual price echovector for this past week's post low (in spaced red).
Note also that coordinate price weakness followed well into the middle of the following month from the end of July last year, from the end of January this year, and from the end of July this year, and how this strong echovector slope, and channel, presently still appears intact within this price pattern perspective. This annual echovector price pattern perspective and its price action symmetries might serve to argue as evidence for continued price down-pressure bias from a technical echovector perspective, even in the wake of both the active presidential cycle echovector's and the congressional cycle echovector's current strong timing up-biases going forward into this week (and with respect to their potential weights on shorter-term swing trading this year).
We should begin to notice a key pivot in the currently active congressional cycle echovector this week if these longer-term price echoes become mitigated by nearer-term (and subsumptive) annual, bi-quarterly, and quarterly price down-pressures, and statistically significant price divergences in the longer turn cycles and patterns begin to emerge. These divergences do happen, but they tend to be rarer occurrences than consistent echoes with possibly alternative amplitudes. This week will prove very interesting.
Conclusions and Positioning Implications
Remaining nimble may be the key this week. I've mentioned that I plan to look at opportunities to add to a short-term swing trading position in the TLT I opened last week, but I will keep an eye on the annual, bi-annual, and extremely strong quarterly price down-pressures and downward momentums evidenced in the above chart. I will also look for possible continuations in these down-pressures, as well as look for a failure in the price echo (and similar strong price extension) of the two-year congressional cycle echovector, a failure that could result in a dramatic downward pivoting of this echovector as we move through the next two weeks.
I also remain open to closing out my short-term long in these events, and considering a position reversal. A breakout above the downward projection of the downtrending bi-annual echovector (highlighted in solid aqua blue), which also so very interestingly reflects the slope of the currently active annual echovector for last week's (and this year's) price low would be reinforcing and bullish. But even this potential breakout should be viewed within the context of the two (solid blue purple) presidential cycle forward price vectors pointing to the end of the year and the beginning of next year, as measured from this spring's top.
Regarding any long-term short positions that may still be open from that top, I would tend to consider them primarily mature, especially in the short term and at the current level of extension, and to possibly be at risk. Therefore, I would be ready to monitor them closely, and be analyzing their potential cover or continuance within short-term trading considerations.
If you believe the time has come to re-enter the treasury long bond, I suggest using active and adjustable straddling positions to manage your exposure to general price level changes in either direction. Setting advanced management straddles at key coordinate forecast levels is an effective and opportune measure, and advanced trade strategy I think prudent to mention. Such an approach to the bond market at this time could prove very valuable at engaging and effectively managing risk and reward. One way to employ such a straddle would be to utilize the TLT ETF mentioned in this analysis by setting up an advanced trade technology approach (see "On-Off-Through Vector Target Price Switch") to positioning and position management, with appropriate dynamic triggers and stops included -- for example, at $106.50 on the TLT.
To perform the short side of the straddle, set a short trigger below $106.50 on the TLT pre-programmed as a "repeating short trigger switch" at this trigger level on reverse downtick action through the trigger price, with stops set to activate on reverse uptick up-through action. To perform the long side of the straddle, set a long trigger above 106.50 pre-programmed as a "repeating long trigger switch" on reverse uptick action through the trigger, with stops set to activate on reverse downtick down-through action.
I'm hoping the EchoVector Pivot Point Analysis Perspectives provided in this article help lend additional context to your potentially already broad and extensive bond market view and analysis, and that they help you to further sharpen your clarity and insight. I always recommend considering a broad range of considerations, analysis, and approaches when assessing the markets for any investment decision.
Color Code Guide for Charts
- Presidential Cycle EchoVector (Four-Year): Long White
- Congressional Cycle EchoVector (Two-Year, Day of week): Yellow
- Annual Cycle EchoVector (One-Year): Red
- Bi-Quarterly Cycle EchoVector (Six Months): Blue
- Quarterly Cycle EchoVector (Three Months): Grey
- Select Support and/or Resistance Vectors and/or Related Price Extension Vectors (of Varied Lengths): Navy blue and/or Blue Purple
Thanks for reading.
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