Bonds "Bull Flag" Break Could Accelerate Downside Quickly
I find the position of Bonds very precarious going into this week. I've heard it said that Bonds are are in total "hands off" mode or "anything but bonds" is said right now. Nobody wants them... and if they fall fast it could literally cause a "Bond Crisis." So this is going to be an important watch.
In the shortest time frame I see a potential Leading Diagonal down, which has a very small correction 50% maximum) already started. My stop is above 62% of this tiny decline. If the natural targets of this leading diagonal are hit that points to a very fast move of 3 points to the 123% - which will be a definitive break of the bull flag. And I think that will create the 1st wave of an extended 5th wave which could target 3.6 or 4.6 extensions for the larger 1-2. That would be a fall of 7 or 11 points and basically 5% yield.
...Which could be dubbed a crisis in the short term.
In the shortest time frame I see a potential Leading Diagonal down, which has a very small correction 50% maximum) already started. My stop is above 62% of this tiny decline. If the natural targets of this leading diagonal are hit that points to a very fast move of 3 points to the 123% - which will be a definitive break of the bull flag. And I think that will create the 1st wave of an extended 5th wave which could target 3.6 or 4.6 extensions for the larger 1-2. That would be a fall of 7 or 11 points and basically 5% yield.
...Which could be dubbed a crisis in the short term.
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If A can't get to 23% then usually B won't get over 38% or even 23% - we'll see...
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Entered here - 5 Puts for Friday, 2 for 30 days - and 5 out of the money calls with 30 to hedge. The Fed could wave a magic wand and rescue these any second :-D
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30 days on the hedge that is, 4 options I think it was.
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Big Pop this morning - could be the bottom is in - or clearing weak shorts before the dump. 138% for ABC, 50% retracement and the underside of the recent trendline could be the resistance to hold it - but that's a big bump.
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I added more long term puts - but it be a fool's errand and we're seeing a leading diagonal up... size wise it just doesn't seem like enough off the bottom of a bull flag. But if the trend has changed in equities, Bonds could come to life.
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Zoomed in Bonds made yet another orderly decline, still above the bull flag boundary.... given the size of the waves in the bounce, I don't think they will make it beyond 38% before heading lower below the boundary.
If they maintain the orderly decline at that point there could be a bounce and retest of the underside.... however at that point we will be in extended 5th wave territory from what is the orange circled count, and they yellow parentheses count. I have seen some extended 5th waves only hit the 100% mark at 109, but those are usually C waves in a counter-trend - where this is with the trend the more likely target is 162%...
If they maintain the orderly decline at that point there could be a bounce and retest of the underside.... however at that point we will be in extended 5th wave territory from what is the orange circled count, and they yellow parentheses count. I have seen some extended 5th waves only hit the 100% mark at 109, but those are usually C waves in a counter-trend - where this is with the trend the more likely target is 162%...
Trade closed manually:
Got movement in our direction yesterday, but I see 5 waves up today - closing slightly in the green.
From there, if the thesis holds we should be targeting 112 for the normal 123% extension of the leading diagonal.
At 112 we will be definitively below the bull flag channel line and I think that's when buyers run for the exits and we extend lower.
Good luck!