Housekeeping: Email server is still down. We are working on it over the weekend. Until resolved please check the website for updates. When this is finally fixed I owe everyone some extra content, my treat. Thank you all for your patience. BONDS & INTEREST RATES Yesterday's update presented the case for higher interest rates and lower bond prices, in particular a decline in TLT, the 20-year U.S. Treasury Bond Fund. Today adds a little more kindling to the fire in the form of a Wave 4 channel which is looking like a better broken-support trigger than the simple trendline in yesterday's chart. In addition, we have an Intermediate Term Trend Model Sell Signal that was generated on Sep 28th. Note on the chart how well these Trend Signals have tracked the indicated wave count. It's all coming together in our favorite pattern recognition trade set-up, a Wave 5 that targets the extreme of Wave 3. That extreme is 133.19. With TLT closing the week at 141.88, that's long way down. The December 17th $140P closed Friday at 3.00. A TLT drop to 133 makes that Put worth a minimum of 7.00 and probably more. Sell Signal: TLT (141.88) Target: <$133 Option: Dec 17th $140P (2.91-3.10) Target: >7.00 Stop (optional): -50% --------------------------------------- STOCK INDEXES This is a chart of the S&P from the lows of the covid crash. There was a system sell signal that coincided with price breaking down through the trendline up from covid low. Below is a short-term view (120 minute) showing a series of lower lows and lower highs, labeled as 1-2, 1-2, 1-2. What comes next? Wave 3. The potential is there and if last Monday's lows across multiple indexes get taken out assume that a Wave 3 down in the stock market is underway. New Sells on breaks of October 4th lows: DJIA < 33,613 SPX < 4,279 SPY < 426.36 QQQ < 350.32 Options: Nov 19th at-the-money Puts. Just because the set-ups are there in both Bonds and Stocks for precipitous declines doesn't mean either or both have to manifest. All I can do is identify the set-ups and a strategy for exploiting the expected follow through. Coincidentally, or not, global geopolitical forces as well as a multiple and spreading economic upheavals (Declining liquidity, declining global growth, global supply shock, China credit crisis - LINK) are adding a fundamental backdrop to go along with the bearish price patterns set out in the above charts. A
