US Long Bonds

Commercial traders, or connected players, continue to fade the price action in US long bonds. As price probed critical support in early April, commercial traders' massive inflows put a floor under the market and stemmed the declined. Since then, bonds have rallied from support. Commercial traders, following previous tactics, have begun to fade the strength. The US Long Bonds Commercial Money Flow and Zoom chart illustrate this reciprocal tactic.

US Long Bonds Commercial Money Flows:


US Long Bonds Commercial Money Flows Zoom:


Now what? Will the market reverse in response to the commercial traders fading strength? Trends, like objects in motion, have inertia. In other words, a trend's direction will resist a change in its state of motion. So, while connected players fade price strength, it's no easy task to change its direction. Besides, while outflows have turned negative, they have yet to reach a statistically significant level. This does not suggest that they must to generate a trend change but rather an acknowledgement studying money flows in isolation has its limits. Investing/trading is a game of understanding probabilities.

A closer examination of the distribution of bets across investor classifications often provides a better look at those probabilities. Nonreportable traders, retail money, tend to be wrong at trend changes. They tend to be bullish before down turns, and vice versa. Although the inflows are not statistically significant, they do reflect a trend that’s heating up. If this trend continues, a bearish setup will be generated and caution will be warranted.

US TBd (20 Years +) and the Nonreportable Traders COT Futures and Options Stochastic Weighted Average of Net Long As A % of Open Interest:


For now, the overhead magnets are pulling hard. Significant energy will be required for a confirmed breach of these zones. This is more important than price.

US Long Bonds ETF (TLT):