TLT – Monthly Analysis
TLT pulled back hard last week. What does that mean for the short-term outlook — and should long-term holders be worried? In this TLT update, we review the price action to determine whether the move is a healthy consolidation or the start of a reversal. We’ll map the risk levels, key setups, and what bond traders should watch next as momentum and trend structure shape November’s path.
CANDLES
TLT closed October with a bullish continuation candle, pushing the price above 8 EMA level. Most likely, we should see a continued move higher in November. However, as the monthly candle was not particularly strong the rally could be limited and/or rather volatile. And the weekly and smaller frames already signal weakness ahead. The weekly candle is powerful bearish, but technically needs a confirmation next week. Until then, I would consider the short/mid terms stance as bearish, but closer to neutral.
Elliott Wave
Mid Term
The green count remains primary. TLT has possibly completed wave 3, and the next level to watch is $88.44 — a break below that level would invalidate the entire 1–5 impulse in green.
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 begun the pullback I warned about a week ago. Its character so far looks corrective, favoring a wave-4 scenario. Once it’s over, TLT has higher odds of exploring upside levels. However, the rally will likely be capped given the lack of technical support. Broadly, the setup mirrors yields, which have started to show signs of proximity to a bottom.
Short/mid term: bearish-neutral
Long term: moderately bullish
Happy Trading!
