TLT – Weekly Review

CANDLES

TLT has a decent shot at a mid-term bottom. The weekly, having confirmed a reversal, now carries technical support. The daily and 3D are stretched, yet there’s no decisive bearish reversal signal. If momentum holds through month-end, and, crucially, the Fed convinces markets of future cuts, the monthly could print a Bullish Engulfing—much like November 2023—setting up an extended rally for at least a month, possibly longer, and this time with stronger technical backing.

In the broader view, TLT is likely to remain bearish on the quarterly and larger frames at September’s close unless it rallies about 10% in the remaining days, which seems unlikely.

Elliott Wave

TLT failed again to form an impulse in either direction, leaving the short-term view exceptionally complex with too many viable paths. The mid-term read is also unfavorable: since the October 2023 low, TLT hasn’t produced an impulsive or diagonal advance, implying a lower low is needed to reset the structure. At this stage, I’m considering a very large wave-4 flat, with its final wave (c) unfolding as an ending diagonal, though multiple confirmations are still required.

Technical Event (Historical)

As TLT recorded an extremely rare and impactful technical event on the monthly frame, I will keep the following piece discussed in the November 2024 monthly report for a reference:

The monthly frame, despite closing with a green candle, is currently viewed as a bearish continuation candle. This interpretation is supported by several technical indicators, most notably the freshly recorded 50/200 monthly bearish cross—a massive and concerning development.

Since I could not find a very long-term dataset for US20Y or US20, I extrapolated the event using the inverted US10Y dataset, which closely mirrors US20Y and has data extending back to 1913. As shown in the chart below, a similar sequence of 50/100, 50/200, and 100/200 MMA bearish crosses occurred in the early 1950s. That sequence is now repeating. Most likely, the 100/200 MMA cross will be recorded in early December (it was).

Adding to the concern, the first wave off the top (on the inverted scale) was strongly impulsive. The key question now revolves around the length and duration of wave 2/B before the next major move down. Will it stretch over another year or two, or has a sharp zigzag already completed? The upcoming annual closure will likely provide significant answers.

SUMMARY

TLT has a solid chance at an extended bounce off the bottom, potentially lasting a month or longer; the move, however, will likely be capped, since the quarterly and larger frames remain bearish.

If the Fed cuts 25 bps with dovish guidance, and hints at additional easing or a softer path for the dots, long-end yields can compress, the curve can bull-flatten, and TLT can string together a multi-week advance. That backdrop would raise the odds of a monthly Bullish Engulfing and keep follow-through alive into October.

If the Fed cuts but pairs it with hawkish messaging, higher long-run dots, or a firmer inflation risk tone, expect a pop-and-fade dynamic. The front end would cheer, the long end could hesitate, and TLT’s bounce would likely be shallower and choppier.

If the Fed holds but signals an imminent easing path, especially with softer balance-sheet rhetoric, the long end can still catch a bid and support a moderate TLT bounce into month-end.

If the Fed holds and leans hawkish, reaffirming sticky inflation and neutral QT, the long end can reprice higher, pressuring TLT and keeping the larger downtrend intact.

Two practical tells, candles first. A firm weekly follow-through next week, and a monthly close that absorbs supply rather than wicking it, would validate the bounce. Failure to hold post-decision gains, especially into the weekly close, would argue for a brief squeeze inside a still-bearish macro frame.

Happy Trading!