Bond Update …

As an update to my prior post on the bigger wave structure for bonds (click here), I think that we are likely inside the corrective wave move after the first leg higher out of the major area of support I identified in that earlier blog post … here are my current thoughts.

US 30-Year Treasury Bond Futures (ZB) – 195 Minute Chart

Based on the look of the move/candles, the move higher out of support for bonds was clearly impulsive and not corrective.  Therefore, I would expect at least another push higher by bonds after a period of consolidation/minor correction.  The next move higher is likely to be made from a bigger level of support so I would look for price to make it down somehow into the typical SLOT support zone.

The next push higher will I believe, offer another attractive risk/reward trade and one that traders should be willing to swing trade.

Cheers … Leaf_West

Bonds – Are We at Near the End of this 3-Wave Structure??

I have been waiting for the TLT to break below the low from February 21st to possibly begin the completion of its current bigger time-frame price structure … today price broke below that $116.51 level and I think the next swing trade in bonds will be to the upside.  Here is what I am seeing. Continue reading

Where the Rubber Meets the Road …

Yesterday I took a look at the break to a new minor high in the tech-heavy QQQ ETF and mapped out three possible scenarios for price as we go forward.  Earlier today I looked at both the SPY and IWM (small-cap stocks) ETFs … small caps are actually breaking out of their consolidation pattern and late on Monday, price on the 195-min chart flipped from yellow/contraction warning candles and signaled the beginning of a new trend expansion phase.  The SPY chart is the index that I like to follow the closest to track what the “overall” market is doing, and it is lagging the QQQ and IWM – we are still below the prior minor pivot high, and we are still in a trend strength contraction zone.  Here are the 195-min charts …

IWM – 195 Minute Chart

SPY – 195 Minute Chart

Bottom Line … small caps will be important to watch, but the SPY is the one that matters most I believe.

Cheers … Leaf_West

Where to Next?

The NASDQ 100 Index has just broken above an important level and we should see in short order, what the market has in store for investors.  Here is the daily chart and three possible roadmaps for the tech market …

NASDQ 100 Index ETF (QQQ) – Daily Chart

The April 18th pivot high for the QQQ was $167.00 … that level was taken out with today’s price action.  By doing so, you have taken out an obvious prior high/resistance level, and one that the entire market will take note of.  Many algorithm trading programs will attack breaks of obvious resistance/support levels, and that is why you often see the market break to new minor highs/lows before reversing.  In essence, the market traps traders playing the initial break, and you see those “weak hands” get rinsed out of their positions by the stronger, more sophisticated trading entities.

So basically, now that price has broken above the prior resistance level, we are either going to fail and reverse, or we are going to gather momentum, and have the MOMO traders jump on this latest move and we should gain steam as we march towards prior major highs.  I have labeled this bullish scenario as #1 on the above chart … the move off of the last low will need to push through the “ABC” extension target zone of $170.05 – $173.69 if we really are headed to new highs.  Typically, I would expect for price to make a new minor high, and then pull-back slightly to test that break – if the move is real, it will trap sellers at the high and steamroll through them.

Scenario #2 is the bullish scenario I would rather see unfold … in this case, price will fail at this break of a prior pivot high and head down to SLOT support.  From support, price would begin moving higher thereby trapping traders who think that a Heads & Shoulders pattern was about to confirm and price was about to head lower.  It is this outsized opinion and short position that fuels the bigger, more sustainable move to new highs.  In essence, bigger corrective moves prior to an attempt to break higher usually leads to a higher odds chance of that break succeeding.

For the possible bearish scenario, (Scenario #3) I would think that we need to fail here as price moves above the obvious prior minor high, likely in the extension target zone.  Price would then correct lower and slice through minor SLOT support at the $160.92 – $156.86 level.  As price breaks below the prior lows, there would be an outsized chance that price was just setting up an even bigger squeeze that could fuel a move higher, but more likely, this type of move would signal some bigger corrective pattern or even the beginning of a bigger trend lower.

Bottom Line … in any of these case, traders should be paying close attention to closing daily and weekly charts to see what type of move is confirming itself.  I will try and update what I see as we go along.

Also, note that my charting software is painting the past 4 daily candles yellow, which visually warns me that trend strength has contracted to the point where trend was now officially in the “Contraction” zone – what follows contraction?? Expansion does … should be an interesting next couple of weeks/months.

Cheers … Leaf_West