Will there be a safe time to buy bonds soon? Sunday 7 March 2021

Following up from last week’s report on bonds, below is a look at the actual regime estimate by the model. Notice the downward pressure during the “Sell the Rip” state. We remain in that state and last week we mentioned a potential 2-month overhang of downward pressure on bonds into early-May.

We got a bounce after the 25th February trigger and so I sold the 10-yr short. While I was sitting on a good small gain heading into Jay Powell’s statement, I chickened-out and closed my position given the potential for serious loss-making gymnastics in FED-induced price-action.

With the new lows achieved after the “disappointment” at the FED’s lack of intervention, is that it? Was that the move forecasted by the model done and dusted?

As things stand, the model remains in the “Sell the Rip” regime and the overhang can last for the next two months, BUT notice the historical strength that ensued at the end of that 2-month overhang.

Something to potentially bake my noodle is the fact that the recent slump in bonds coincided with the “overhang” period from the early January signal. Therefore the green-zone window of strength described above is about to open up soon as seen below.

Could it be that we enter a basing out period which the Elliott Wave theorists would call a series of 4th and 5th waves to define some form of bottom in bonds?

Bottom-line though is that unless the model switches regime, I will be looking for bounces to sell.