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Sentiment speaks: Big bond rally to come despite Fed

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The common rule is that you “can’t fight the Fed.” Well, sorry, but I don’t agree with that premise. As well as market history facts. I think the best conclusion is that the Fed can’t fight the market, like The market is much stronger than the Fed.

I can cite many examples over the years that we fought the Fed and won. I can cite examples using the US dollar, the bond market, and the stock market. And if you are interested in our successes fighting the Fed (when you told us most of the time we were crazy), feel free to read my articles from the past, this is just one example:

Emotions speak: I fought the Fed… and won

In my last article on bonds, I was looking for a support area of ​​135 to hold and provide us with another bigger rally. However, as I explained, if the 135 area does not hold, it is a strong indication that the bond market is likely to have reached a long-term top, and we’ve started a long-term bear market in the bond market. In fact, as I told my members of The Market Pinball Wizard, even if we did get 135 support, it wasn’t a long deal I was going to do because it was very speculative. And as we know, 135 did not hold as support, and the bottom fell after that.

So what does that really mean for us at this time?

Personally, I don’t have a horse in this race. In fact, the last time I got into the bond market was when I bought TLT about 113 times in November 2018, expecting a huge rally. As we know, the market rose all the way below the 180 level before the market reached the top. It hasn’t been that long in this market since we got close to the top of that rally.

But, now that the market has seen a big drop, I’m seeing the bond market jump to lower lows and establish a huge rally over the next year or so. While I don’t think we’ve reached the “bottom” of this drop, and that there is still a possibility that we will go down to the 106-109 region on TLT, I think any additional weakness is likely to create an eventual bottom in 2022 in the bond market. . (But please keep in mind that my basic view is that the next rally is likely to be a corrective rally and will likely not exceed the highs recorded in 2020).

Of course, many will look at this analysis in light of the fact that the Fed continues to raise interest rates. But, keep in mind that I made a similar prediction in November 2018 when the Fed still planned to raise rates at the time. However, surprisingly, after the market bottomed in pennies from our lower target in November 2018 and then began its biggest rally towards 180, the Fed changed its intentions several months later. So, you see, the bond market was led by the Fed, not the other way around. And if you look closely at history, you’ll see that this is exactly how the bond market and the Federal Reserve work. The bond market is led by the Federal Reserve.

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So, the TLT chart tells me that either the market doesn’t care about the Fed’s intentions, or the Fed will actually change its intentions over the coming months.

So, in conclusion, I see a bottom structure developing in the TLT, with our next support in the 106-109 region. And when we spread through Zone 127, we should be on our way to Zone 150+ in the next 12-18 months.

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Also, I’ll be too busy to travel during the summer, and won’t be able to post general articles regularly. Furthermore, when I post, I may not leave the comments section open if I am not able to monitor it and respond to comments.

2022-06-02 11:55:00

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