I monitor a couple dozen Market Experts and have noticed lately a common theme that the Soft Landing the Fed and BA have been touting is about to crash land due to an employment bubble, CRE Bubble, Cryptos Bubble, Markets Bubble, Residential RE Bubble, and a Major Regional Banks Bubble A.K.A. the Everything Bubble.
Fact: When the Fed Raises % Rates UST Bonds and notes drop. When the Fed Drops % Rates UST Bonds and notes rise.
One of the cycles researchers I follow looked closely at the 2007/08/09 Bubble and crash and noted that the Fed Dropped % Rates to ZIRP or zero interest rate levels as Stocks, Cryptos, Banks, Employment and Real Estate crashed, and bankruptcies and foreclosures exploded nationwide.
He noted that Gold the metal even crashed by 50% - not as bad as the other listed assets but still bad.
This was because many Investors and Institutions and Hedge Funds use Margin Leverage to goose returns on the way up - but get Margin Calls on the way down and have to sell off anything liquid at market prices that are dropping not to be wiped out in Margin Calls.
One reason I have learned to never trade on Margin.
The cycles expert noted one Exception... during the Great Financial Crisis one asset class held up and rose quite nicely as a global flight to quality being US Treasury Paper both notes and bonds. He noted two ETF funds that appreciated during the 08/09 GFC crash. TLT is a 20-year avg US Treasury Bonds Fund and ZROZ is a 25-year avg US Treasury Bond Fund - of the two TLT is more liquid and widely traded.
My research discovered there is an interesting 3X ETF on the TLT - promises 3X returns of the TLT, good when rising and not so good when falling.
Weds May 1 we have the FEDs FOMC interest rates decision day. This occurs at 2PM and the Fed Chair Powell Speech is at 2:30PM.
Experts I follow are expecting NO cuts - hold steady, and possibly 1 RATE increase in June 2024 before the elections due to inflation starting to rise again.
Fed holding stronger for longer against inflation will cause markets havoc especially if Powell's 2:30PM speech even hints at no cuts and a rate rise.
Will be interesting to see the Markets reaction this Wednesday and how the TLT 3X ETF (TMF) reacts.
TLT Chart vs TMF chart...
TLT Dropped approx 100 to a low of 82 from its ATH in March 2020. Currently sitting at 88.88 today.
I will be watching TLT and TMF like a hawk looking for a bottom turn and then plan to ride the 3X TMF for a full run.
TLT full Run could be in the range of 180 to 200 whereas a TMF Full run could be back to previous TMF ATHs of 582 to 600 range, a 10X to 20X return.
More recent TLT fractals and Fibonacci's analysis:
TLT A=1.618 C leg is close at to 86.72 However if the Fed hints at actually raising rates TLT could retest a low of 80. Lower horizontal target.
TMF: Closing in on 1.618 near term retrace at 39 and a half. ATH was 582 on March of 2020.
When the FED succeeds in bursting all the above bubbles TMF will be poised for explosive runs up at protected Full Faith and Credit of the US Govt lower risk. Not a guarantee but as close as it gets in the Investing Game.
In Fractal Wave theory when we complete a 1.618 ABC corrective, we enter into a next 5 Fractal Waves Up Sequence. Unless of course the Fed decides to raise rates again. Stay tuned.
TRAC+7.14%
