TLT – Weekly Review
There were no significant developments in yields, and all points from the quarterly review remain intact. TLT had an interesting technical development that prompted updates to the short- and mid-term charts, hence this weekly analysis.
CANDLES
It looks like September’s monthly Bullish Engulfing pulled a few strings on the smaller frames. The weekly held the 50-WMA and formed a healthy continuation candle. The daily is also bullish. So the short and mid terms are bullish.
But we must remember that the quarterly remains bearish, even if Q4 makes a sizeable advance. TLT needs to close above $99.33 on December 31 for a flip, and we will monitor this development.
Elliott Wave
Mid Term
I’ve been thinking a lot about the wave TLT has been forming since May. With a few assumptions, I could accept the very first wave as a Leading Diagonal. In that case, the current wave could be viewed as wave iii of 3. Note that there was no overlap between the assumed waves i and iv (1 bp apart!). Obviously, the large number of gaps complicates the analysis, and several assumptions will remain unconfirmed. If this is right, then the structure would align with the mid-term projection for wave (c) of 4 on the Mid Term chart.
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 of an extended bounce after the September close—potentially for a month or longer—but the move will likely be capped, as the quarterly and larger frames remain bearish.
From an Elliott Wave perspective, there is a chance of an impulsive wave up, and I wish I had more solid data to back up this hypothesis.
Happy Trading!
