The US Bond market has been in a bull market since the 1980s and although I originally was looking for a potential high early this year, we have not really progressed much further, expect that real rates have come down even lower and tested the prior December 2008 lows at 2.5%, potentially creating a double bottom.
No one knows for sure how low yields can go, but from a technical perspective, it sure looks a great setup for a reversal.
When you look closer there appears to be a wedge shape or what market technicians call a "bearish wedge". We see these patterns at the top and bottom of a trend as the momentum slows down and the trend is in a transition and reversing the direction.
Having hit and exceeded my target, I suspect Bonds could see a bit more upside towards 153.50-154 based on the continuous contract.
Based on my Elliott Wave count from the 1981 low, I suspect this is actually inside wave 5 and near a terminal phase of this bull market, although we still don't have any strong evidence to confirm the bull market is over, based on the wedge shape the odds still do look good for a reversal close by.
Close by in this market means weeks and months, as I think traders forget this is a 30 year span, not a 15 min chart, so a transition from topping to reversing lower is an ongoing event and will take months, but the fact that it clearly is showing a bearish looking wedge is a positive sign for the bears, but I think it will require a bit more patience for what arguably will be the "trade of the decade".
Until next time,
Have a profitable week ahead.
