Treasury bonds distribution pattern
During the past weeks I have written about the strong possibility for the markets to make one final large move higher. With last weeks gap up, I believe we have started this move. At this point it is anyone’s guess how high we might go, and I am not going to attempt that. Climax moves can be futile to predict. The indicator charts I usually review are still fairly bullish and don’t make for exciting blog posts. That is the reason I decided to mix it up and look at a few interesting futures charts today.
Last year I repeatedly warned of the peak in Treasury Bonds:
On 6/3 I wrote “Treasuries headed for a blowoff top”. That weekend we saw 152.15, which was the actual buying climax (see chart above).
On 8/4, I labeled the false break correctly, right after it happened.
Recently we saw in the news renewed bullishness in treasuries. Jeffrey Gundlach, renowned bond investor turned bullish a few weeks ago, and indeed, after his call, treasuries broke out of their steep down channel (chart above). Since then, we have fallen back into the channel with an accelerated move.
Even though the daily chart shows some dip buying, supply is still clearly in control. We could bounce, but I suspect we will not bounce before we hit the area of previous demand (see chart above), that also co-incides with the bottom of the bullish channel. This bounce could set us up with a very large head and shoulders pattern. I believe the bounce should be a trade-able event. I would however hold back on buying, until the treasuries show some signs of strength.
On the chart above, I compared the treasury chart to a typical Wyckoff distribution chart. It doesn’t get much cleaner than that. It is rare to see such a clear distribution.
Is the Euro back-testing a Head and Shoulders bottom?
The EURO is a different animal altogether. Despite the Berlusconi shock, I believe we could be witnessing the backtest of an inverted head and shoulders neckline. If we don’t take out the neckline, we should be headed higher. If we do, we should bounce on the red trendline, but the big picture would become much less bullish.
Daily retracement levels on the Euro. Confluence ahead
We are near a Fibonacci confluence zone as well. Friday’s candle didn’t look so hot. Lets see if we can hold the lows and return to an uptrend.
Oil still curling up for a big move
Oil reversed again. I wouldn’t be surprised to see us move up to the yellow trend-line next. We have built up a lot of energy in this multi year sideways triangle. Once we break out, we will most likely have a big and fast move.
Gas going up again. Lets see if resistance holds
Gasoline is stronger yet and headed up to resistance again. If we break it, we have a good chance for another expensive driving season.
Gold still ok above 1530
Gold surprised me. I hadn’t expected this down move to continue after the initial A-B-C correction. If we cannot hold the 1530 level, we are in trouble. Don’t get faked out with a fals break!
