One of the most enduring, if not the most enduring, trends in the financial markets has been the run of the 30 year US Treasury bond. From its low in September 1981, T-Bond have been on a relentless 35 year uptrend, almost linear in nature. The chart below is a monthly chart of the back-adjusted continuous futures contract. The price action has been well contained within its ubiquitous constant-width dominancy envelope for almost thirty years. The indicator at the bottom of the chart is tracking the rate of change of the underlying trend as measured by the dominancy envelope. As can be seen, the momentum is waning considerably. Will the coming round of interest rate increases finally turn the long term trend down?
A filter analysis of long term interest rate data (inverse of bond prices) dating back to the 19th century reveals the same consistency and cohesiveness of price waves found in the U.S. stock indices, albeit a different average frequency. The bond prices exhibit certain spectral characteristics (i.e. moderate amplitude modulation) that make them very suitable for cyclical trading. My retirement plan is now clear. If bond prices start trending down with the same consistency as they exhibited in the uptrend, upon reaching full retirement age, I’m using my Social Security check to short bond futures for the rest of my life!