U.S. Bonds – Where’s the Top?

U.S. Treasury Bond Futures Continuous Front Month

Bonds Monthly 6-4-2016

Question:

Bonds have been pressing the channels that originate from the 1981 and 2008 lows since April 2015.  The level is significant and a break above these channel lines would likewise be significant.  In other words, conditions would be ripe for parabolic price behavior.  If bonds are going to ‘blow-out’, where is the attraction point and when might they reverse?

Speculative Answer:

Price (where)

Aside from the channels, the 1981-1998 and 2000-2016 rallies relate by .618 in % terms.  The rally from 1981 produced a 145% advance.  The rally from 2000 has produced a 90% advance and 90/145 = .62.  The Fibonacci relationships do not end there.  The 1998-2000 decline was 34% and 34/145 = .234 (approx. .618^3=.236).  If nature has a grip on the bonds, then the next logical stopping point would be where the 1981-1998 and 2000-2016 rallies relate by .786 (.618^.5).  Solving for X yields 190.  Bonds at 190 would produce a 114% (approx.) rally from 2000 and 114/145 = .786.

Time (when)

The 1981-1998 rally covered 205 months.  The rally from 2000 would cover 205 months in February 2017.  Here’s the fun part; prospective channel resistance from the trendline that begins at the December 2013 low intersects 190 in February 2017.

U.S. Treasury Bond Futures Continuous Front Month

Bonds Monthly 6-4-2016 Comparison with 80s Low

Does 2015-2016 Mirror 1980-1981?

A different approach arrives at 187.  Simply, mirror the bottoming process in 1980-1981 and compare it to price action from the 2015 high (done in red on the chart).  In other words, the 1980 low mirrors the 2015 high and the next high will mirror the 1981 low.  The 1981 low is 12% below the 1980 low.  12% above the 2015 high would be 187.  The 1980 and 1981 lows are 19 months apart.  19 months from the 2015 high is November 2016.  Hmm….there’s an election then.  Fun part revisited; prospective channel resistance intersects 187 in November 2016.

JS