The 30-year Treasury bond made an interesting top in January. After a series of higher highs, which were punctuated by excellent time windows, the action has turned south. A quick review shows the top came 262 (Fibonacci ratio) trading hours after the November high, which was 359 hours beyond the September high. The 359 calculation is one less than a 360 degree circle. These high-to-high calculations are a bit out of the norm but perfectly acceptable in Fibonacci and geometric time analysis.
One of the most interesting aspects of the bond chart is the inverse movement with the stock market. As you can see in “counting the hours,” it topped on Jan. 23 and retested resistance on March 20. The stock market made an initial low Jan. 23 and either retested or made a fresh low on March 17. Price action failed at resistance and dropped back near the bottom of the range. This occurred as stocks staged a spring rally.
However, bond selling stalled near the 115 area and consolidated sideways from April 17 until May 28. As you can see it tested support four times before breaking through to test the February low. Normally, breaking support of this type might spell serious trouble but there are a couple of important relationships holding up the chart.
First, the low set on May 29 is 89 (Fibonacci) days off the top (we eliminate mini holiday sessions). Second, internal wave calculations suggest the leg from the April 14 secondary high failure to the bottom has a 1.618 extension (line CD) relationship with the leg from March 20 to April 1 (line AB). There is a good price and time cluster at this low. The next important thing to look for is a test of prior support of the consolidation range from April 17 until May 28. A failure there would indicate a flip in polarity that would lead to much lower prices and higher rates on the long end of the spectrum. An initial attempt to return to the trading range has penetrated the range, which is likely due to the good price and time cluster. However, after a five-week test of support the retest from the other side may take a couple of weeks.
What’s the verdict? The competitors for the White House offer divergent views on the future course of our economy. While the chart looks bearish at this point, we could very well stay in a trading range all summer due to the close nature of the Presidential race. But any drop below the April to May support area can lead to dramatically lower prices and higher rates.
Jeff Greenblatt is the director of Lucas Wave International.com which has analysis on stocks and the futures market. He is the author of “Breakthrough Strategies for Predicting Any Market,” a Marketplace book.