• 6 hours $15/Hour Minimum Wage Might Happen Naturally
  • 24 hours Could This Be The Hottest Investment Sector For 2021?
  • 2 days The Single Most Exciting Mental Health Breakthrough Of The Decade?
  • 2 days Money-Laundering Binance Probe Report Adds To Bitcoin Woes
  • 4 days Pipeline Hackers Lose Access To Ransom Funds
  • 4 days Military Coups Are Big Business
  • 5 days Crypto Market Crashes As Tesla Turns Its Back On Bitcoin
  • 6 days Gold Bulls Are Facing An Uphill Battle
  • 7 days Has The Dogecoin Hype Fizzled?
  • 9 days America's Semiconductor Shortage Is Just Getting Started
  • 12 days The EU Begins Backtracking On China Trade
  • 13 days Americans Are Sick Of Unfair Taxation
  • 15 days No Jab, No Job: The New Hardline Policy of U.S. Employers
  • 17 days What’s Included In Biden’s $6 Trillion Economic Plan?
  • 18 days The “Great Car Comeback” Brightens Oil Demand Outlook
  • 19 days The 3 Most Profitable Covid-19 Vaccine Stocks
  • 21 days Beijing Launches Digital Currency To Break AliPay-WeChat Duopoly
  • 22 days The New Economic World Order After Covid-19
  • 26 days 3 Signals To Watch For A Stock Market Correction
  • 28 days Netflix Earnings Red Alert: Subscriptions Could Underwhelm
Another Retail Giant Bites The Dust

Another Retail Giant Bites The Dust

Forever 21 filed for Chapter…

How The Ultra-Wealthy Are Using Art To Dodge Taxes

How The Ultra-Wealthy Are Using Art To Dodge Taxes

More freeports open around the…

What's Behind The Global EV Sales Slowdown?

What's Behind The Global EV Sales Slowdown?

An economic slowdown in many…

Elliott Wave International

Elliott Wave International

Elliott Wave International

Elliott Wave International (EWI) is the world's largest market forecasting firm. EWI's 20-plus analysts provide around-the-clock forecasts of every major market in the world via…

Contact Author

  1. Home
  2. Markets
  3. Other

Violent Bond Selloff: An Eye-Opening Perspective

In Elliott wave terms, bond investors have transitioned from extreme optimism to extreme pessimism

[Editor's Note: The text version of the story is below.]

What a rout in the bond market in November (Bloomberg, Dec. 1):

Global Bonds Suffer Worst Monthly Meltdown as $1.7 Trillion Lost

The price of U.S. Treasuries nosedived as 10-year yields -- a.k.a., interest rates, which move inversely to bond prices -- saw their steepest climb since November 2009.

Bloomberg (Dec. 1) provides another perspective:

The 30-year-old bull market in bonds looks to be ending with a bang. The Bloomberg Barclays Global Aggregate Total Return Index lost 4 percent in November, the deepest slump since the gauge's inception in 1990. Treasuries extended declines Dec. 1.

Elliott Wave International subscribers were prepared well ahead of time.

On June 17, well before the rout, The Elliott Wave Theorist showed this chart and said:

30-Year T-Bond

The 30-year Treasury bond made a new all-time high on June 16. The triangle is indicative of a fourth wave, making the recent thrust a fifth wave.

This wave count is terminal. Bonds are on their last leg.

But, at the time, most speculators disagreed. Even so, bond prices topped less than a month later. Said our U.S. Short Term Update on July 25:

The wave structure of the rally ended at the 177^11.0 high on July 11. Sentiment remains historically optimistic. The most recent tally of the Commitment of Traders data shows that Large Speculators (trend-followers) remains a tad off a 21-year record net long extreme in the percentage (of open interest) of bond futures and options contracts they hold. With Commercials taking the opposite side of this trade, the sentiment set up is in place for a continued bond price decline.

Despite the historic optimism, Treasury bond prices continued to decline.

This week, as of Dec. 1, the 30-year yield rose to as high as 3.15%. That's a 51% climb since the July low of 2.085%.

In other words, in the short term, the market sentiment in bonds has transitioned from a highly elevated optimism four months ago to a deep pessimism we see this week. In fact, the 30-day bond Daily Sentiment Index (trade-futures.com), which our U.S. Short Term Update quotes quite often, is at its lowest level since September 2013 - a contrarian indicator.

Investor psychology could grow even more negative toward bonds. But, keep in mind that countertrend moves in financial markets usually occur when sentiment reaches an extreme like the one we’re seeing now.

Put differently, the 30-year Treasury bond's price pattern is again looking highly interesting -- although, again, in the opposite way most investors expect.

 


Unleash the power of the Wave Principle

Much like a great sports play; to appreciate a great market forecast, you have to see it. In fact, we'd like to show you four. Our examples do indeed show what can happen when Elliott analysis meets opportunity. But we're not asking you to attend a class in 'good calls.' In each of these four markets, the unfolding trends have (once again) reached critical junctures. You really, really want to see what we see, right now.

Get your report -- How to Find Real Opportunities in the Markets You Trade -- FREE

This article was syndicated by Elliott Wave International and was originally published under the headline Violent Bond Selloff: An Eye-Opening Perspective. EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

 

Back to homepage

Leave a comment

Leave a comment