More downside for bonds in the coming weeks

2015년 5월 23일

The ETF representing the Vanguard Total Market is down around 3% off 2015 highs, and about 4.5% off the highest point in 2012.

First, the minor support level at 82.02 was broken, followed by the next minor support at 81.84.

A move below the major support at 81.37 will break the rising channel going back to the September 2013 low, effectively breaking the recent uptrend.

Unfortunately, that's precisely what I'm expecting given the corrective pattern unfolding off the January highs. In Elliott Wave terms, the pattern appears to be a double zigzag (2 consecutive 3-wave abc patterns), labeled WXY. Utilizing the theory that corrective patterns tend to channel around 90% of the time, an area price target of 80.80 to 81.16 seems reasonable for the intermediate term.

What comes next is far less clear in the long term, but a bounce that lasts for a period of at least several weeks is reasonable. A longer term view will require that a new price channel is established up or down, or an 8-wave EW setup (5-wave impulse followed by an ABC correction). I wouldn't be surprised at all if prices were confined in this narrow 2015 range for the remainder of the year.