This is the video recording of our September 6th Monthly Charts Live Strategy Session
[Video] Technical Analysis w/ Josh Brown & Michael Batnick
Are Bonds a Bust, Again?
From the Desk of Ian Culley @Ianculley
Heading into Q3, we wanted to play a mean-reversion bounce in US treasury bonds. A long list of reasons supported this position:
- US Treasuries experienced their worst H1 in history (or close to it).
- Bonds were finding support at their previous-cycle lows from 2018.
- Commodities and inflation expectations peaked earlier in the spring.
- Assets that benefit from rising rates (financials) were making fresh lows.
- Global yields were pulling back.
And, quite frankly, our risk was well-defined. We can’t ask for much more. For us, the greater risk was not taking a swing at this trade in the event bonds ripped higher…
Two months later, bonds across the curve are taking out their 2018 lows. The market has proven our mean-reversion thesis wrong. But we can live that because we manage risk responsibly.
It’s the most important part of playing this game.
Easily, the second-most important is to remain flexible.
As investors and traders, we have to be able to change our opinion on any given market, especially when the data no longer supports our thesis!
We’re going to check that box today as our outlook pivots lower for bonds heading into Q4. Basically, if US treasuries are below their 2018 lows, you’ve got to be short!
A Friendly Reminder From the Bond Market
From the Desk of Ian Culley @Ianculley
Identifying trends is one of the most important jobs of a market technician. Regardless of our time horizon, we have to understand the general direction the market is taking.
It sounds simple, but it’s the foundation of any market thesis.
Once we have the underlying trend nailed down, we can focus on the areas of the market we want to exploit and pinpoint the best tools and strategies to do so.
When I think of the most critical trends to date, my mind immediately goes to interest rates. Rising rates and inflation have been the key drivers for two years now.
Despite some corrective action in recent months, the bond market has been reminding us that we’re still in a rising-rate environment.
Let’s take a look.
Keep Your Eyes on Prior-Cycle Highs
From the Desk of Ian Culley @Ianculley
The market environment has been shifting in favor of the bulls all summer.
Breadth thrusts are firing as participation beneath the surface expands. Risk assets – commodities and stocks alike – are reclaiming critical levels of former support.
And our bull market rebirth checklist is triggering four out of five criteria.
This is a huge departure from earlier in the year.
But one aspect of the environment remains the same – interest rates. Yes, rates have come off their June peak. And, yes, US yields have paused at a logical level marked by a series of former highs.
That’s all true, and it all makes perfect sense.
But we still find ourselves in a rising-rate market as the underlying uptrend remains intact – for now.
HY Is Hitting Higher
From the Desk of Ian Culley @Ianculley
More pieces of the puzzle are falling into place for the bulls.
We’ve been pounding the table about the dollar and rates for months, and now they’re starting to take shape.
On Wednesday, the US Dollar Index $DXY broke to fresh lows, violating a multi-month trend line.
And interest rates… well, they haven’t moved much. They continue to hold their range after peaking in June.
As expected, stocks surged yesterday in response to a weaker dollar and stable bond market.
But stocks aren’t the only risk assets on the rise. Investors are moving out on the risk curve and bidding up high-yield bonds, too.
The Roadmap for Rates
From the Desk of Steven Strazza @Sstrazza and Ian Culley @Ianculley
It’s been an action-packed year for the bond market. Rates have ripped, and bonds have been in free fall worldwide. But US yields stopped going up in June.
More recently, many European benchmark rates have turned lower in dramatic fashion.
Now the question is whether US yields will roll over and follow to the downside.
Instead of getting caught up in the Fed chatter and all its implications, let’s focus on the key levels we’re using as a roadmap for treasury markets in the coming weeks and months.
[Premium] Monthly Charts Strategy Session August 2022
This is the recording from the August 2022 Conference Call for Members of the Allstarcharts India! Before getting into individual stock ideas in India, we’re going to first start with the global macro perspective. Once we identify the direction of the underlying trends from a structural and broader view, then we’ll dive into the NIFTY Indexes on both longer-term and short-term timeframe. We want to look at Large-caps, Small-caps and everything in between before getting into the Sector and Industries themselves like Energy, Banks and Pharma.
This is when we finally break things down to the individual stock scenario with identified risk vs reward opportunities. That is what this is all about – aligning ourselves in the direction of the underlying trend while at the same time identifying where the risk is to make sure the potential reward is skewed exponentially in our favor. You will find that throughout this process we discuss Momentum, Fibonacci and Relative Strength. I encourage you to check out the Education Section so you know exactly where I’m coming from when you hear me mention these tools.
Here is the video in full:
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