TLT Price Actions Builds Bat Harmonic Pattern
Dragonfly Capital | Apr 27, 2016 08:53AM ET
Today at 2pm Janet Yellen and her FOMC will release a statement on monetary policy. It is anticipated that there will be no change to their actions, keeping short term interest rates steady. In a few weeks we will get to see the minutes of the meeting that led to that no decision. They will likely state that the economy worldwide is delicate and inflation under control while employment gains are strong (saved you a click in the future).
But will those minutes talk about another phenomenon? Will they address the Bat that is flying in the Treasury? You have not heard this story yet in finance twitter, or on Financial TV? Well here are the facts.
The US Treasury ETF (iShares 20+ Year Treasury Bond (NYSE:TLT)) started 2015 moving lower. It created a series of lower highs, meaning rising yields, for a year. Then when the calendar flipped to 2016 it reversed course with a strong move higher. A peak coinciding with the stock market bottom in mid February led to a pullback and a bounce. That bounce has now also failed and the ETF is heading lower.
This price action has built a Bat harmonic pattern (you didn’t think there were critters flying around did you?). And this pattern suggests that there is more pain in store for holders of Treasuries before it gets better. The pattern completes at the Potential Reversal Zone (PRZ) at a price of about 121 on the ETF. That is another 5% lower. And the momentum indicators support this path. Both the RSI and MACD are moving lower and into the bearish zone.
DISCLAIMER: The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.
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