-- Posted Wednesday, 10 March 2004 | Digg This Article
One of the key assumptions of my technical method is that my proprietary “hidden pivots” are not chopped liver. By this I mean simply that, when a support or resistance pivot is easily exceeded, it is not because I have miscalculated its location, but because the trend has proven sufficiently strong to blow right past it. Thus does a pivot easily breached imply strongly that the trend will continue; and the bigger the breach, the longer and farther the trend can be expected to run.
Which brings me to the June T-bond futures and their implicitly bullish action on Tuesday. A day earlier there were good technical reasons to presume that an important top awaited near 115^00. Longtime subscribers will already know that when I use the word “near,” it means within a tick or two and usually no more. So when the bonds pushed well past 115^00 -- all the way up to 115^18, in fact, which is three ticks above the highest hidden-pivot resistance I’d been able to find on the intraday charts, it impelled me to look at a bigger picture. This I have done, extrapolating from the weekly chart the seemingly farfetched conclusion that seemingly overstretched 30-year bond futures could rally an additonal 10 percent from these levels. That would put them at five-year highs equating to a price of 127^21, basis the June contract. Incredible!
I’ve long maintained that the bond markets in general are far too complex to analyze by looking at so-called “fundamentals.” But when you push all the competing arguments aside and simply study the charts, as far as I’m concerned, it’s much easier to guess right about where yields will be six months from now. Those of you who have followed my forecasts over the years will know that this is no idle claim – that my predictions for long-term trends in interest rates have been consistently accurate over time. I must confess to you now that, without my charts, and relying solely on instincts and the information I have gleaned from newspapers and magazines, my predictions about interest rates would have been wrong, wrong, wrong!
Just the Facts, M’am
And now, a purely mechanical reading of those charts suggests something I can scarcely believe based on my knowledge of the real world, such as it is – namely, that interest rates are headed significantly lower. There is only one guy I know of who has been predicting this all along -- Bob Bronson, of Bronson Capital Markets Research. Much as I respect his work , this forecast alone is one about which I have remained skeptical all along. Now, though, I’m not quite so sure.
For those of you interest in the technical reasoning behind a 127^21 target for the June bond futures, here is a further excerpt from Wednesday’s edition of Rick’s Picks (www.rickackerman.com):
“The rally has surpassed all hidden-pivot targets that can be calculated using the lesser charts, so let's take a look at the 'weekly' to see whether it supports the case for even higher prices. A subtle but nonetheless important factor favoring the bulls is that last June's spiky peak at 124^12 exceeded a small but distinctive peak at 123^19 made almost several years earlier, in April 1999. Technically speaking, the effect was to turn the entire rally cycle from the March 2002 low (97^06) to the June 2003 high (124^12) into a major, bullish "impulse leg" with a presumptive follow-through leg that began last August and continues to this day.<p>
Simply Incredible
“The current leg has a formidable hidden-pivot resistance at 114^02 that was easily punctured, suggesting that the big bull trend could go as high as 127^21 (!!). That sounds too incredible to believe, really, but we don't need to believe in it to trade this vehicle successfully; we need only keep in mind that much higher prices are possible. As a practical matter, we'll try to identify lesser bullish targets by scrutinizing the weekly charts with a magnifying glass. This will permit subtle targeting of intraday moves, using the long-term charts.<p>
“So what does this reveal that might be of immediate interest? For starters, there is a hidden-pivot resistance at 115^18 that was breached by three ticks yesterday. This implies the rally has further to go -- presumably to the next hidden-pivot resistance, 116^29. Since the trend is still strongly higher, I will provide yet another hidden-pivot target that would come into play if 116^29 is exceeded by more than two ticks. The pivot lies at 117^20, and it is the last lesser resistance we can use before we must start to take the seemingly absurd idea of a move to 127^21 seriously.”
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Copyright 2004 by Rick's Picks. All rights reserved. Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indicator of future results, so let the buyer beware. Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers’ initials will be used unless express written permission has been granted to the contrary.
-- Posted Wednesday, 10 March 2004 | Digg This Article
