An epic battle is being fought between bulls and bears in U.S. bonds.
The primary trend has been bearish for a long time, as I explained HERE. By the end of October 2022, a secondary reaction started that topped on 12/7/22. Following a strong pullback, the ETF IEF broke topside its 12/7/22 closing high unconfirmed by TLT. On 2/2/23, TLT was about to break up above its 12/7/22 highs but missed. Such non-confirmation told us that the most likely outcome was bonds going down (interest rates up) because the primary trend was and remains bearish. Following the non-confirmation, both ETFs started heading south again. However, TLT and IEF could not pierce their October 2022 lows which would reconfirm the bearish trend.
So, interest rates are at a crossroads now:
1) If TLT finally takes out its 12/7/22 closing high, the primary trend would turn bullish, suggesting lower interest rates ahead (and likely the much-announced recession).
2) If TLT does not break up and both ETFs drop until the October 2022 lows are jointly pierced, the primary bear market will be reconfirmed, suggesting higher interest (and likely inflation) ahead.
Manuel BlayEditor of thedowtheory.com