Wednesday, June 3, 2015

Dow Theory Special Issue: US bonds flashing primary bear market signal

We have to wait to today’s close to be sure.

Some days ago, I alerted that US debt was flirting with a primary bear market signal.

Furthermore, I made clear that a new primary bull market had been signaled for the Euro and CHF.

I am writing before the close, so my conclusions are not final. However, as you can see in the chart below  IEF (ishares 7-10 Yr Treasury bond ETF) has just violated its last secondary reaction lows and, hence, it is confirming the bearish action of its peer TLT (ishares 20+ Yr Treasury Bond ETF). The blue ellipse on the right side of the chart highlights today's action. As per the Dow Theory a confirmed violation of the last recorded secondary reaction lows flashes a primary bear market signal.

This is a textbook Dow Theory pattern. If today’s IEF close remains below the red horizontal line (which highlights the secondary reaction lows –red rectangle-) then a primary bear market will be signaled.

Couple this with the primary bull market in the EUR and CHF, which was also signaled here, and while we are talking about odds and not certainties, it seems that weakness for USD bonds and the USD is a more likely event in the days and weeks ahead. By the way, the primary bull market in EUR/CHF has not been hitherto challenged by a secondary reaction (no decline has lasted at least 8 days), and hence our Dow Theory stops remains fixed at the last primary bear market lows (highlighted by a red horizontal line at the bottom of each chart).

So let’s wait to today’s close.

Here you have the two vital charts you have to monitor:

First the TLT/IEF chart (US long term/medium term debt).

Anatomy of the end of a primary bull market.

And the EUR/CHF chart, which shows us how the antidollar (the EUR) is faring (in a bull market)

A new bull market has been born for the EUR and CHF...The antidollar is in good health now
The Dow Theorist

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