My Name is Bond. Treasury Bond

The chart below displays the Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity, Quoted on an Investment Basis that is Inflation-Indexed (TIPS). The timeline stretches from 2003 to 2023.

Throughout this period, the yield experienced fluctuations, with a notable peak around 2008, which corresponds to the Global Financial Crisis (GFC).

Following the GFC, the yield declines significantly and even dips into negative territory before gradually rising again. Shaded areas on the chart indicate U.S. recessions, providing context for the yield fluctuations in relation to economic downturns.

This peak reaches slightly above 3%. In contrast, by 2023, the yield is seen rising sharply again, approaching a level of 2.49% as of the last recorded data on October 19, 2023. When comparing the two periods, the 2008 peak was higher than the current 2023 level by over half a percentage point. A rough estimate would place the average yield in the period from 2003 until today in the range of 1% to 2%. The five periods with the highest yield tops are:

1. The most prominent peak occurred around 2008, during the Global Financial Crisis (GFC), where the rate surpassed 3%.
2. During 2007, the rate approached levels close to 3%, though slightly below the 2008 peak.
3. In 2006, the rate peaked slightly above 2.5%.
4. A significant peak is visible in 2023, with the rate reaching 2.49% as of the last recorded data point.
5. In 2004, there was a noticeable upward movement where the rate peaked at around 2.3%.

After the GFC, the highest peak prior to 2023 was in 2018 at around 1.14 %. While being the most restrictive since the GFC, there were even more restrictive periods leading up to the GFC topping at a TIPS yield of 3 %.

The above chart showcases the historical performance of the 20+ Year Treasury Bond iShares ETF (TLT) over a span of approximately 20 years. In the early 2000s, TLT's price movement was relatively stable, with minor fluctuations.

However, around 2009 and 2011, there were noticeable spikes in its value. Starting in 2015, TLT began an upward trend, culminating in its peak near the 180 level around 2020.

After this zenith, there has been a substantial downturn, with the ETF currently trading at the 83.24 level.

From the peak around 2020, I can identify the following potential waves:

1. The initial downward move from the top until the first significant upward retracement can be considered as Wave 1.
2. The subsequent upward move after Wave 1's decline can be Wave 2.
3. Following Wave 2, there's a more extended and pronounced downward movement, which can be Wave 3.
4. After Wave 3, there's another upward retracement, which can be labeled as Wave 4.
5. Finally, the last downward move that reaches the current point at 83.24 can be identified as Wave 5.

Thus, from the peak around 2020 to the current point in the chart, it appears there are five waves down, fitting with the typical Elliott Wave pattern for a bearish impulse sequence. Within the Elliott Wave Theory, each impulse wave (like Wave 5) is also typically divided into its own five smaller sub-waves. Let's analyze Wave 5:

1. The initial decline from the start of Wave 5 can be the sub-wave 1.
2. The subsequent small upward move can be considered as sub-wave 2.
3. The next pronounced decline is potentially sub-wave 3.
4. The following small upward retracement can be sub-wave 4.
5. The last downward move to the current endpoint could be sub-wave 5.

It seems that the Wave 5 can be broken down into five smaller sub-waves. This may indicate that the initial 5-leg impulse wave is (close to) complete.

Analyzing the chart for the 20+ Year Treasury Bond ETF (TLT) that showcases its monthly performance from 2003 to 2023, we can identify several key zones that indicate potential long-term support:

1. 2008-2009 Zone: There is a noticeable cluster of green dots (representing upward price movement) around the 2008-2009 period. The price seems to have found support around the levels of approximately 87.56, where it subsequently rallied upwards after some consolidation.
2. 2013 Zone: Another evident area of support is seen around the levels of 83.24 in 2013. Following this, the price witnessed a robust upward move, further validating this zone as a significant support area.
3. Present (2023) Zone: Fast forward to the current period, the ETF's price is once again approaching these same levels. As of the latest data point, the price is hovering around the 83.24 mark, converging with the aforementioned historical support levels of 87.56 and 83.24.

These recurring price behaviors around the 83-88 zone across multiple years indicate a strong historical support area. The ETF has shown resilience and a propensity to rebound upon reaching this region in the past.

Thus, it's plausible to suggest that the ETF has hit a long-term support level as of the current chart's time frame (2023). This is underscored by going back even longer in time.

1. 2003 Zone: Starting from the leftmost part of the chart, there is a consolidation period around the levels of approximately 83.24 in 2003. The price was relatively stable around this zone before embarking on an upward trajectory.
2. 2005 Zone: Moving slightly to the right, we observe another instance in 2005 where the ETF made contact with this same region near 83.24. After touching this support level, there seems to be a minor rebound.
3. 2008-2009, 2013, & 2023 Zones: As previously mentioned, the price revisits this support region in subsequent years, each time showing a degree of resilience or upward momentum.

In conclusion, the 83.24 level has acted as a crucial support area for the ETF multiple times throughout its history: initially in 2003, then 2005, later in 2008-2009 and 2013, and currently in 2023. The repetition of this price behavior over two decades underscores the importance of this zone as a long-term support for the ETF.

Actionable Advice: I expect the yields of the 10-year notes to move a bit above the yields of the 2-year notes. I expect the yields of the 2-year notes to stay stable or decline a bit in the short term. It may be that only the 30-year bonds move above the yields of the 2-year notes.

Such disinversion is a buy signal for long-term bonds and risk-on stocks (NASDAQ 100). The NASDAQ 100 is negatively correlated to the yield of the 20-year bonds. When the yield topped in late 2022, the NASDAQ bottomed. I expect similar behavior in 2023.

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