U.S. Treasury Bonds Elliott Wave Long View
Interest-Rates / US Bonds Jan 11, 2015 - 02:38 PM GMT
Unfortunately, this chart doesn’t go back prior to 1990, but there are clues that tell me where we are in the Elliott Wave structure. Wave III, for example, is exactly 12.9 years long. It is followed by a Triangle Wave IV, which is 3.87 years long.
Wave V is nearing an end. It is trading in a very straight trading channel. (It looks managed, don’t you think?) It is highly probable that the end of the T-bond uptrend may get a little help from a decline in equities. If so, a peak between the end of April and mid-May in bonds may correspond very neatly with the next potential bottom in the SPX. In other Words, the “flow” will be out of stocks and into bonds.
I am treating the potential target in USB as a minimum, since a very large crash in stocks may produce a huge blow-off in USB, beyond the upper trendline of its trading channel.
TNX, of course, is an inverse of UST, but it is very commonly referred to as far as yields go, so it has become a habit to use it rather than TYX. Ti shows the same (inverse) pattern as USB, so it is instructive. It appears that Minor Wave C of Intermediate Wave (3) will extend to the bottom trendline, indicating a surge of money lowering yields. The minimum decline appears to be near 15.00, but it may go lower.
Note: The Payroll Report has launched TNX into Wave [v] of C. This means that money is now rotating out of stocks, despite the algo’s reaction to the news.
This appears to correspond very closely to the Broadening Diagonal in SPX. Remember, the domestic bond market is over $100 trillion, while the capitalization of the US stock market is close to $21 trillion. Back-of-napkin calculations suggest that a 5% decline in bond yields would need a 25% decline in stocks, on average. I realize the calculation is likely to be more complex than that, but a more complex study is beyond the scope of my current efforts.
Suffice it to say that we may see a hefty panic decline.
Meanwhile, the Monthly Jobs Report says, “Total nonfarm payroll employment rose by 252,000 in December, and the unemployment
rate declined to 5.6 percent, the U.S. Bureau of Labor Statistics reported today.
Job gains occurred in professional and business services, construction, food
services and drinking places, health care, and manufacturing.”
This is blowing away expectations on Wall Street. This switched the Premarket from a negative to positive. The reality, however, is that it may be a severe disappointment for those seeking more QE to boost the market. Headline reading algos are no substitute.
Regards,
Tony
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Disclaimer: The content in this article is written for educational and informational purposes only. There is no offer or recommendation to buy or sell any security and no information contained here should be interpreted or construed as investment advice. Do you own due diligence as the information in this article is the opinion of Anthony M. Cherniawski and subject to change without notice.
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