At first blush this looks decidedly bullish. We have a spike. We have TLT making the golden cross (50 day crosses above 200 day average) and we have what looks like a security that is above the 50 day and ready to bounce off of it and follow the path of the green line.
On the other hand on the RSI we have negative reversal and on the composite RSI we have a very steep negative reversal. On both RSI and composite the line has hit a prior resistance level.
It's worth noting that today's spike did not fill the gap on the far left and while it is likely a signal for where TLT is heading we should look at the prior spike back in March to see that a retracement was in order before that signal would be recognized by the market.
Here's a zoom in on what I think might happen:
I'm getting the overall feeling that tomorrow is going to be a down day for the market which would make it an up day for TLT. Here I think we're just about finishing the 5th wave of the larger pattern. On the small chart, the zig zag action looks very much like an A/B/C consolidation. C is digging deep which would mean that the coming wave 5 could be quite a blast. I'll be setting a buy stop to catch it.
Upon completion of the 5th wave, TLT should be begin the larger fractal retracement necessary to start the next big wave. This I think would be where we finally get the remainder of our stock market rally. How far it retraces is a good question but the negative reversal on RSI indicates a little below the last retracement, in the 93 range. EW guidelines would also suggest that the 5th wave retracement would end in this area.
As I believe that the much larger picture for TLT is a 5/3/5 correction, this would then complete the first part of that pattern (5). Our retracement could be jagged or it could be quick. Once complete, we'll get another 5 wave that I think should take several months to complete. 93 or thereabouts, I believe therefore represents an incredible buying opportunity.
The other possible action is that what I believe is a C wave is really that retracement. This would certainly be welcomed by me as I'm long the market. This is why I suggest buying the 5 wave with a stop rather than catch a falling knife that keeps falling.
And of course the last possibility is that I'm dead wrong and TLT rockets upwards and never looks back. It would be hard to imagine that happening without the composite RSI backing off quite a bit so I do believe that if this is the case that we'll get an opportunity to re-evaluate.
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