Bond charts were noted by analysts over the weekend as developing a massive head and shoulders top. In the charts below the weekly chart clearly shows this. The monthly chart on the bond contract was noted as being about 90% complete. Below we show three chart views, monthly on the lower left, weekly on the upper left and daily on the upper right.
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My discipline in approaching chart analysis is nebulous by design. I have been in this business for more than two decades and I have seen chart patterns highlighted by scores of analysts, and where and how the neckline gets drawn, can be different, the downside projection can also vary quite a bit, as some will project the move lower as some percentage of the top of the head to the neck line, and so on and so forth. So the lines I draw below are just illustrative and not to be taken as gospel. Some will tell you and as I heard over the weekend www.financialsense.com the downside projection would take price to around 82.00 and this seems reasonable. The same analysis also correctly points out that the formation is somewhere around 90% complete, so moving forward you can look at the monthly and daily charts and see that some sideways choppiness will be likely occurring possibly and quite likely for months. Therefore going out and buying 90 puts for example for say a Mar. 10 expiration (currently that is as far as you can probably trade with any reasonable liquidity on CME products) would likely be a waste of money. There may be other products that you could speculate with that might allow a longer term trade, but I am not familiar with them at this time. I believe most people reading these pages know more than I do about charting, or have access to people and tools that can analyze charts for them and in a manner they are comfortable with, so I trust that you will use them. What I try to provide here among other things is a sense of the flows that are occurring which does lend conviction to the chart patterns. Volume and open interest is the blood pressure and temperature of the market after all. Keeping up with the fundamentals and looking “outside the mainstream” is also essential and requires judgment and experience. Following the money is prudent, and having a sense of volatility trends is also helpful in putting on profitable trades with the contracts currently liquid and available. So do feel free to consult with me and you will see what I mean tompthp@cs.tom.
Disclaimer: The writer makes no guarantees as to the accuracy of the data portrayed hear. The data from sources including the exchanges themselves is for illustrative purposes. You must consult with a licensed commodity broker before entering into any futures type of trading activity.
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