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.
Sincerely,
Manuel Blay
Editor of thedowtheory.com
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