MT chart update:
(click chart for full view)
A cluster of resistance exists between 128.50 and 130.50 (black box). It includes a gap, the 61.8% fibo retrace level, trend-lines and horizontal support/resistance zone. This would be the next best place for wave 2 black to end as a sharp correction and then start heading down into a 3rd wave decline with initial target of 108 to 110, but eventual target down into the 80s or lower.
If 130.50 is breached to the upside, then last ditch resistance for wave 2 is likely at a multi-year descending trend-line above at approx. 134ish. beyond that point, resistance thins out, and wave 2 black is in jeopardy, becoming far less likely to produce a turn down into wave 3.
The long term count from Jan. 2011:
Once 105 is taken out, the bond market slide may accelerate.
In A Nut Shell:
The US 30 year bond hit a major 30 year cycle top in 2010 and has since created what appears to be a clear, well defined stand alone 5 wave impulse down. After wave 2 black is finished preferably below 130.50, another impulse down (wave 3 black), will most likely be larger and quicker than wave 1 black. These initial wave structures should be all part of a very long term 30 year cycle to the downside. Interest rates (yield) is likely to climb into the double digits, progressing forward into the next 3 decades.
Fundamentally the reasons for a long term bond market slide are numerous. One of the principle movers is likely the retirement of the baby boomers, starting en masse this year and the next. What has generated the bond market appreciation over the last 30 years is likely the same force that will unwind it. Baby boomer nest eggs have a large stake in the long term bond market. As BBs proceed into retirement needing to draw upon those retirement savings for income, the bond market is likely to see precipitous selling for many years to come.
Please understand that this is my interpretation of the market technicals and fundamentals. I have been wrong before and can be wrong again. Please do your own due diligence.
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