Bulls should have their eye on treasury bonds now
Following up on our August post about treasury bonds, the market has made a minor new low as expected. Now the pattern becomes more risky for bears, while bulls might have begun watching for an entry.
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Looking again at the iShares 20+ Year Treasury Bond ETF (NASDAQ:TLT), we see that price is testing the Fibonacci-derived support zone at 83.95 to 82.25. It’s quite possible the pattern could extend lower, and there are additional big-picture supports at 77.84, 74.95 and the area from 69.60 to 69.18. However the formal requirements have been met for completion of the downward impulse that began in 2020.
On a slow trading time frame, bulls would like to see a weekly close above 91.69 in order to be reasonably confident the market can climb away from the low.
Zooming in with a daily chart, we believe the pattern down from wave (iv) has consisted of an impulse that just keeps extending. Is the final wave [V] of ‘v’ of (v) of [i] complete yet? The wave count can be interpreted either way.
If price continues extending downward, then the most relevant supports on a daily time frame mostly match the ones shown on the weekly chart above. There is additional minor support at 79.68.
For traders working on a daily time frame or faster, a break and daily close above the Fibonacci-derived price level at 88.58 would lend initial confirmation to the bullish case. Cycles suggest that could happen somewhere between late October and mid-November.
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