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Approaching Potential Reversal In Rates

Elliot Wave Technical Analyst & author @ Elliott Wave Trader
March 3, 2023

I have been really busy of late, so I have not had a lot of time for article writing. But we're at a crucial point in TLT, so I thought I would post an update. I'm posting this on Thursday, March 2, and hopefully it will be out on the morning of March 3. As I write this, we are over the support I outlined last time, but the micro structure suggests it may not be complete to the downside.

Back in October, I outlined to the members of ElliottWaveTrader my expectations for TLT to bottom in the 90.50-91.65 region. Well, as we now know, the market bottomed at 91.85, within 20 cents of my target. And, yes, this was despite the common certainty that rates would only head higher.

As the market was approaching the highs struck after that rally, I penned an article on Seeking Alpha on Dec. 5, two days before we struck the highs, outlining my expectation for a pullback.

Sentiment Speaks: Is Now The Time To Fight The Fed?

Since that time, the market bottomed in my target zone, and rallied back to the highs. However, I was still not certain that we were ready to break out just yet. So, in my last article, I outlined the larger degree support I was tracking, which if held by TLT on the current pullback, would likely set us up for a break out rally pointing us to 120+.

Sentiment Speaks: Time To Fight The Fed - Rates Are Going Lower In 2023

However, the nature of the current decline leads me to see potential for the market to drop a bit deeper than I had initially expected. The current structure of the decline may suggest that as long as we do not see an impulsive move through the 101.70, with follow through over the 103 region, we may extend a bit lower toward the 96-96.50 region.

Therefore, in summary, our smaller degree resistance is now the 101.70-103 region, with first support coming in at the 97.70-98.50 region. If an impulsive rally begins off that support, and breaks out through resistance, then we likely have our initial indications that the market is going to try to set up for a rally to 120+ over the coming months.

However, if the next rally is corrective in nature, and maintains below cited resistance, then the market may test as low as the 96/96.50 region. A successful test would see an impulsive rally begin off that support and break resistance noted above. That would be the signal that a multi-month rally to the 120+ region has likely begun. And, clearly, a sustained break of the 96 region would make this potential much less likely.

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Avi Gilburt is a widely followed Elliott Wave technical analyst and author of ElliottWaveTrader.net, a live Trading Room featuring his intraday market analysis (including emini S&P500, metals, oil, USD & VXX), interactive member-analyst forum, and detailed library of Elliott Wave education. You can contact Avi at: [email protected].


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