First, a bit of housekeeping: Late Friday SPCX triggered a Long position in the December $170 Calls (the $175-$180 Calls are acceptable alternatives) when it closed above $150.00. The trade is now in the Premium Service's portfolio, subject to our usual hard -50% stop. Give it room to work. 23 YEARS OF SUPPORT - AND THE ONE NUMBER THAT MATTERS Let's kick this weekend update off with one of the better "what if' set-ups that has come our way all year. Take a look at this long term chart of TLT, the iShares 20-year Treasury Bond ETF: TLT Monthly Note the far lower right corner of the chart: Friday's close, $80.87. That's less than one-half of 1% above the lowest price in the entire history of TLT - $80.51, reached in May 2003. Calling that major support would be an understatement. For our purposes, round it off: $80.50. That's the number that matters. This weekend we're considering what actions to take if that support is breached in the days ahead. Hint: The Federal Reserve meets this coming week to discuss interest rates. What could go wrong? WHAT IF $80.50 DOESN'T HOLD? And this is where Confirmatory Analysis gets interesting. The long-term chart tells us where we are. The intermediate-term chart gives us some idea of where we could go if support gives way. TLT 2-Day Elliott Wave analysis isn't a prediction machine and these targets aren't forecasts. But the structure gives us a way of measuring the potential opportunity. A confirmed break of 23-year support could open substantially more downside: TLT 2-Hour WE DON'T HAVE TO PREDICT ANYTHING Here's the beauty of it: We don't have to decide whether Elliott Wave is right. We don't have to predict what the Federal Reserve will say. We don't even have to predict where interest rates are going. TLT will tell us. Friday's close was $80.87. The 23-year support zone is approximately $80.50-$80.75. If that support holds, there is no confirmed breakdown. If it fails—particularly if TLT begins closing beneath $80.50—the price action confirms the bearish thesis. SO HOW DO WE TRADE IT? Friday afternoon, with TLT hovering just above 23-year support, I personally established small starter positions in the January $80 and $78 Puts. Why January? Because if we're right about the larger setup, I don't want to be right about direction and wrong about time. January gives the trade more than four months to develop while still providing substantial leverage if TLT breaks down. But here's the important distinction: those were starter positions, not confirmation positions. The real signal comes if TLT decisively breaks—and begins closing below—the $80.50-$80.75 support zone. That's where we would look to add exposure. If support holds and TLT turns higher, there is nothing to confirm—and nothing to chase. TLT January Puts The $80 Put gives us the higher-delta core position; the cheaper $78 Put gives us more leverage if the breakdown accelerates. AND THEN THERE'S THE STOCK MARKET... A breakdown in long-duration Treasury bonds through 23-year lows would mean sharply higher long-term yields. With equity valuations already elevated, that could become more than a bond-market story. If stocks begin responding negatively, TLT may give us a second trade—the collateral damage. But first things first: The Fed, bonds, interest rates, 23 year-support - what comes next merits its own update. Stay tuned. Active Options PRO Service Premium Service
