Critical Decision For Treasuries…Here’s Why
I’ve thrown a lot of information out over the last
few columns and need to do some housekeeping. If I could summarize in
bullet-point form, here it is:
-
Broken Patterns lead to powerful moves -
Looks like
Donuts are winning -
Equity markets are stalling at key Fibonacci decision points -
Black Gold…Texas Tea
First, if you recall
a recent column stated equities and long-term bonds were both hitting
bearish patterns, and that one would violate the bearish pattern and rally with
strength, which also translated to the other likely selling off. Well, below you
can see a chart of the 30 Year Treasury Futures Contract
(
USM3 |
Quote |
Chart |
News |
PowerRating). This
contract had completed a Bearish Gartley pattern 10 trading sessions ago. It
created a very short-lived two-day sell off, then a hard reversal to the upside,
to “bust up†the Bearish Gartley. My comments in the previous column were to
watch that broken pattern. A failed Bearish Gartley almost always creates a
momentum situation that drives a chart up to complete a Bearish Butterfly
pattern.
That is exactly what is happening in this contract below.
Today we had a relatively large move up to complete this Bearish Butterfly
pattern (highlighted in red below). This contract is also hitting a key
resistance zone and also completing another pattern highlighted in grey, which
is an AB=CD pattern. Critical decision for Treasuries right here.
Now, on the flipside because bonds moved up and had a
“pattern failure†situation, the natural progression was that equities would
sell off. Well, that has not happened. Basically, stocks have hit resistance and
are in a holding pattern. The
Semi HOLDRs
(
SMH |
Quote |
Chart |
News |
PowerRating) are still facing multiple bearish patterns against resistance. The
same holds true for the
Nasdaq 100 Tracking Stock
(
QQQ |
Quote |
Chart |
News |
PowerRating).
Now, on Monday, it was the “Battle
of the Bulge†column. I highlighted
Krispy Kreme
(
KKD |
Quote |
Chart |
News |
PowerRating)
and Weight Watchers
(
WTW |
Quote |
Chart |
News |
PowerRating). They were both setting up long. Below you can see KKD has risen over
the last couple of days and WTW has fallen back immediately after announcing
earnings Monday night.
My theory here
is that members of Weight Watchers are holding meetings at Krispy Kreme shops.
Regardless, I have taken partial profits on KKD as it has hit a key resistance
zone. I have trailed my stop to break even on the trade on the balance. With WTW,
my stop is below Monday’s low. This is either a double bottom against support or
we are likely to head lower and accelerate into a downtrend.
Finally, let’s look at the Oil Service HOLDRs
(
OIH |
Quote |
Chart |
News |
PowerRating).
If you haven’t noticed, this group has been quite strong over the past few
trading sessions. As I pull up a weekly chart, it is evident that this security
is headed up into a large Fibonacci price resistance zone to complete a few
Bearish Patterns. So, I can tell you my plan is to be taking profits on any long
positions in this group as we approach this zone and tighten stops on those long
positions at the least.
Have a great night!