Gentlemen may prefer bonds, but with the Fed set to unwind its massive $4.5 trillion worth of Treasury and mortgage-backed securities, it seems pretty clear that interest rates have nowhere to go but UP from here … with Treasury bond prices heading lower – perhaps in a tailspin!
In fact, Fed Chief Janet Yellen could provide additional details about the timing of the great T-bond unwind at this week’s Jackson Hole symposium. Next up on the calendar is the Fed’s next policy meeting: September 19 – 20.
Either way, Treasury prices are ripe for a fall sooner or later. Just take a closer look at the chart below and you’ll see …
Following an initial sharp decline, Treasuries have managed to rally back into key resistance at the upper end of the downtrend channel for bond prices that goes back to mid-2016.
We expect sellers to come out of the woodwork here to push bond prices right back down, to the lower end of the channel. In fact, our E-Wave cycle forecast indicates a downward turn date is imminent … followed by a sharp decline in September, right on cue with our pitchfork analysis above.
Fundamentally, there is also solid support for a bearish Treasury bond call, because speculators are now holding the biggest net-long position in 10-Year Note futures than at any time since the darkest days of the financial crisis in 2008.
And as we know from experience the “fast-money” crowd is typically dead wrong at key turning points like this. As the specs are forced to capitulate, unwinding their long bets in the weeks ahead, it should make for a spectacular selloff in Treasuries!
Here’s how you can profit from it:
Using 5% of the funds you have allocated to this service, BUY the Direxion Daily 20+ Year Treasury Bear 3X Shares, symbol TMV, at $18.50 or better, to open. This order is good-till-canceled.
Get this order in to your broker right away. We will be closely monitoring a mental stop on TMV for you for the time being. Hold all other positions and stay tuned for more updates and analysis.
Good investing,
Mike and David
