TLT – Weekly Analysis
Saying that the final three trading days of the year may be stormy for bonds would be a serious understatement given the underlying technical currents. In this update, we review the key candlestick formations, technical indicators, and Elliott Wave structures—mapping risk levels, identifying the dominant setups, and outlining the signals bond traders should closely monitor as momentum and trend shape TLT’s path through the end of December.
CANDLES
TLT made another attempt to rally this week, but the move was once again rejected at the 200 DMA, ending with a daily Bearish Engulfing. The weekly closure remained inconclusive and still requires confirmation. Adding to the downside pressure, the 8- and 20-weekly EMAs continue to expand their bearish cross. The monthly frame is increasingly concerning: unless bulls deliver roughly a 1.5% advance in the remaining days of December, the month will close bearish. The quarterly and semiannual candles are also shaping bearishly.
As outlined three weeks ago, TLT has completed a Head & Shoulders pattern, and the downside targets remain unchanged.
Elliott Wave
We will discuss the mid- and long-term outlooks at the end of December, once all large-frame closures are in place.
Short Term – Flag
No changes to the potential flag targets. If TLT makes a new lower low (below the 2025 low), it will open the path to the double-target level implied by the Head & Shoulders structure.
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
The odds remain bearish across all frames, and TLT faces the risk of a sizeable decline. In a worst-case scenario, the instrument could suffer a double-digit loss over the next few quarters.
The mid- and long-term structures may require reassessment, but any updates will be addressed after year-end, once the large-frame closures are available.
Short/mid term: bearish
Long term: neutral–bearish
Happy Trading!
