Monday July 25, 2022
10 50 AM CST
Here is my comment from Thursday July 21, 2022
TLT long dated bonds rallied today up 1.73% but still in the cluster range we have recently experienced. NO real change in the closed end municipal bond fund
Today Monday suspicions confirmed. TLT shot higher for one more day on Friday. today it has reversed down 1.03%. This leaves a formation known as an island reversal.
from Investopedia
What Is an Island Reversal?
An island reversal is a price pattern on bar charts or candlestick charts that, on a daily chart, features a grouping of days separated on either side by gaps in the price action. This price pattern suggests that prices may reverse whatever trend they are currently exhibiting, whether from upward to downward or from downward to upward.
Notice on Friday the rice gapped up even stronger than on Thursday. but today it has gapped down. The gaps separating Friday from the range of Thursday and today is why it is called an 'island reversal.' And as the quote says this suggests a reversal from whatever direction the trend was in.
Great, I am thrilled this should set us up for a fifth wave down in bond prices. That should give us a low risk entry with a high return particularly in the closed end municipal bonds.
And it works the other way as well. Here is TBF a bear bond fund, also exhibiting a double bottom and reversal to the upside, which is just what we would expect. Also notice it bounced right off the 200 bar moving average on this 240 minute chart.
This looks like a fifth wave low from the mid January high.
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