US Notes&Bonds Analysis

I expect a right translated trough in Treasury yields similar to what was seen in 1900 sometime in 2024. William, it looks like your filter might have started rolling over to higher yields but I’m not really worried about that at this point, mainly because of the smoothing implicit in your approach. Your filter did the same thing in 1900 and rates continued lower for a good number of years. In addition, I’m guessing your filter will repaint a fair amount because of the very long lookback needed on this data set.

I will post my peak-only ST analysis on Treasury yields from 1857 when I have time.

Curt

That is correct. While there is some error at nowtime on the extrapolation through such a long lag period, the further the data moves away from the turning point the more accurate it becomes. It is the same mathematical principle upon which the FLD is based. The 60 year wave is so obvious that a properly constructed FLD will show when that wave turns. However the FLD break will be many, many years after the price action turns on a wave that long.

I realize most Hurst analysts apply the absolute high/absolute low, always synchronized approach to phasing but the filter approach does not work that way. It is like peeling an onion. I use shorter and shorter harmonically constructed filters to extract the dominant waves down to the shortest wave based on the sampling period I’m using. The shorter the wave, the closer it is to the absolute high or low. Just like FLD’s, the lag is proportional to the length of the wave being extracted. I do not use the turn of an extrapolated filter as an “action signal.” I use the peaks and troughs of the filter output to determine the deviation from the average period of the price wave, draw VTL’s, and construct the appropriate FLD’s.

Even if yields go to zero, all the waves will continue to cycle, albeit with smaller amplitude.

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10 Year appears to have put in a 2.5 wk low here–7/25. [Along with Gold and the Yen] 30 year a bit weaker. Let’s see what we get out of this next 2.5 wk cycle. I am cautious here and have moved my stop to just under the most recent low. I’ll be looking to take partial profits during this next 2.5 week cycle near the highs of the last 10 week cycle.

I also re-initiated longs in junk, high yield-munis, and emerging market bonds at the last 10 week low. All have exceeded the previous 10 week cycle highs. IEF lagging here.

I don’t expect anything good to happen to emerging markets (or any other risk asset) between now and the third week of Sept.

The Fisher transform allows for easier visual phasing in my opinion. I detrended price first using RSI.

Treasuries are lagging although IEF is holding up better than TLT. Stops are good at the 20w VTL. I still think this is a mid-channel pause but watching closely. If stocks do what I expect, Treasuries should catch a bid into mid-August.

Curt

Correction: That’s the 21w FLD not the 11w.

I need more time to check the relative performance of IEF and EMB.

EMB Daily

Here is what I find interesting. From 1/16, the first 17 wk cycle bottomed 5/16. Another 17 weeks there was a low at 9/16. That should have been the 34 wk (nominal 40 wk) as well. However, the 40 wk cycle did not bottom for another 9 weeks. This goes back to what I mentioned previously, the window for the 40 wk wave can be +/- 1 cycle of the 10 wk cycle. The 10 week cycle is 2 degrees higher in frequency than the 40 week.

Now, the first cycle from the 11/16 low was 16 wk, bottoming 3/17. Another 17 weeks brings us to 7/17. EMB appears to have put in a 17/33 wk bottom. Will there be another 10 week cycle to finish the 40 week like the previous cycle, or have we indeed seen the bottom of the longer cycle?
I’ll let price tell me–

Now, I do not trade EMB. I use DLENX. A bit of a smoother ride. In both directions. 3.7% Dividend. DLENX has already put in a higher 10 week cycle, EMB is testing it high now.

Price is tracking along the 20 wk FLD (Green). This 2.5 wk cycle has yet to break above the previous. IF this breaks lower, price will be below the 20 wk FLD and likely provide a deeper correction. Price is late crossing the 10 wk FLD.

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What is the teal colored FLD?

10 wk FLD…The 10 wk FLD should be crossed by the 2.5 wk low. It represents the Mid Channel Pause of the 10 wk cycle.

10 year Notes are testing the recent 10 week high. I have 8/8 as the most recent 5 wk low.

Price is nearing the midway point of the most recent 2.5 wk cycle. There is also an 8 week high-high-high which just occurred last week. I will be looking to take partial profits here, likely sometime this week. I will exit the entire position once the 10 week cycle top has been confirmed. Price is tracking the 20 wk FLD.

I sold all my junk bond positions. Still hold high-yield munis and emerging markets which are at or very near yearly highs.

Need to be aware of the 40w and 80w FLDs since coming up on an 80w high in price (low in yield) later this year. The rate picture seems clearer to me (below). 40w FLD (teal) was resistance. Broke through the 10w FLD (black) and now traversing along the 20w (red) with the 80w FLD (brown) coming up. Looks like a congestion zone here but if 80w FLD is broken expect lower yields through the end of Sept with another potential move down into year-end. This would be consistent with my longer term phasing analysis from ST dated 6/20 in this thread.

Curt

TY Daily

I took some profits on my bond position today. Price is at the high of the second 1.25 wk cycle from the previous 5 wk which I have as 8/8. TY is not quit to the 10 wk FLD target. If that is achieved, I will unload the rest. Otherwise, I will sell the rest on any indication that the 10 wk peak is in.

Still holding emerging markets, high-yield munis, and AGG.

With the recent cross of the 80w FLD (brown), I expect another 2 points of upside in IEF into late September/early October. 10 year Treasury yield target-1.92% area.

I had to really dig for this one… Let’s start to update this one too

@TY

Weekly with 20 wk cycle lows

Daily. This is an example of another bullish sequence. Red bars show late in the cycle, cycle low 9/13, cross 2.5 wk FLD (purple), next day trend turns up, sideways reaction against the new uptrend, uptrend resumes.

2.5 wk Target achieved, 5 wk FLD target close to goal. My trend target once it turns up is a test of the bar that made the high–that has been achieved as well. Price is now at the 10 wk FLD. Test of high coming up.

Weekly… Test of Top

Daily

Let’s see if price can get under the 20 wk FLD (green) then turn up at the 5 wk low with support at the 10 wk FLD (cyan) then a cross lower until mid November.

This may support a rally for equities into mid November…

Notes & Bonds…

Both are starting to print red bars and 5 wk FLD target is close. 22 TD since the last low with avg period of 24 bars by my model.

Top chart has 2.5 wk target for @ TY, bottom has the 5 wk target for @US

@TY Weekly

Expectations are for some temporary support this week from the 20 wk FLD.

Daily…

5 wk low looks to be 10/17. Next 20 wk nested lows expected mid-late Nov.

Intraday…

Targets mid 130s here. If price gets up there, will evaluate for SHORT.