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Short Squeeze in Treasuries?

Interest-Rates / US Bonds Mar 04, 2016 - 10:30 AM GMT

By: Anthony_Cherniawski

Interest-Rates

Day 43 came and went with a small throw-over of the trendline at the close. This final thrust made 21 waves (an impulse) from 1931.88 to today’s close, so I don’t see how they can add any more waves to it.

The normal amount of time in a counter-trend rally is 21 days in a bear market, and often much shorter. Today is day 21 from the February 11 low, so it appears to have fulfilled the time requirement. One of my Swing Models suggested February 26 would give us the turn, but it is now 6 calendar days overdue. Since tomorrow is 4.3 market days from my projected “swing high,” I had originally suggested that tomorrow would be the first low of the decline. I will eat crow over that call.


A longer-term Cycles Model suggests that tomorrow may be the Pivot (turn) day, instead. This Cycle may take precedence over the lesser Cycles. It accurately predicted the August 24 low and the January 20 low while the shorter-term swing Cycles were up to a week off. I feel more comfortable with the shorter-term swing Cycles since they are easier to identify, but I cannot ignore the implications of the longer-term Model.

Would you believe that the Swing Model on the VIX calls for a flash crash in stocks between March 7-9? It seems hard to believe from here. The minimum it implies is a breakout above the prior highs.

I believe that the VIX has been “jammed” to prolong the rally in SPX. In fact it may make the decline in stocks even worse.

The retracement in TNX appears to be over. However, someone is trying to short treasuries and it may end very badly. The Cycles Model isn’t clear on this, so I wouldn’t be surprised to see a probe higher tomorrow morning if that someone is trying to head off the decline in stocks with a short squeeze in treasuries.

ZeroHedge has this to say,” Yesterday, when looking at the suddenly tumble in the repo rate of the 10 Year, which we noticed that it had drifted sharply into "super duper" special territory, and which according to SMRA was bid at -1.75% while CA saw it as low as -2.75%, we asked: is a major Treasury squeeze on deck."

I suspect that most of the move, if any, may be made in the Premarket. The monthly jobs report is due at 8:30 and may quickly put an end to the rise in TNX.

Regards,

Tony

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