Today we have a guest post from my friend and fellow Technician James Bartelloni. He is a U.S. Navy veteran and spent 12 years in the cockpit as a TOPGUN graduate in the F-14. Having graduated from the US Naval Academy with a BS in Mathematics, he later went on earn his Chartered Market Technician Designation. Bartelloni is now a Portfolio Manager for V50 Capital Management.
I think you’ll enjoy Bart’s take on Fixed Income – JC
In order to get a feel for the markets, it’s necessary to monitor the “circle of life” consisting of Fixed Income, Equities (global and CONUS), Commodities and the Foreign Currency Market. One of these markets is at very key levels – the fixed income market. Even within a single instrument we look at different investment options. In this case we look at futures, ETF’s and Mutual Funds to seek confirmations of potential bull/bear inflection points.
Knowing full well the FED is on everyone’s mind this week, we thought it would be important to look at what the charts are saying in the fixed income market. Three investment vehicles are presented: $ZB_F (Long Bond Continuous Monthly Chart), RYJUX (Mutual Fund) and $TLT (ETF). Using some basic, yet powerful, techniques one can see we are at or approaching key inflection points from both a PRICE and TIME perspective. (click charts to embiggen)
1) Long Bond Future: exceeded the standard deviation bull channel but is pausing right at the extreme measured move of bullish price movement. Additionally, other price projection techniques not shown are confirming this area to be strong resistance. Mind you, much like the parabolic runs in Gold ($GC_F) and Apple ($AAPL), exceeding a standard deviation channel can/will ultimately cause price action to come back into the channel but not before it potentially explodes in the direction of the break. This is a 30 year run at extremes in price …. stay tuned.
2) RYJUX: a mutual fund that corresponds, inversely, to price movement. It’s symmetrical march down confirms the Long Bond. However, note the PRICE/TIME convergence appearing…could be forecasting a nice bounce or, perhaps, a major low?
3) TLT: for any Elliot Wave aficionado’s a 5 wave move UP is completing. This ETF is hitting numerous targets in addition to the 5 wave count shown.
Bottom Line: interest rates, as shown by these three basic charts, are at a key inflection point. Stay tuned …..