Video duration 9min 37sec.
Market outlook video reports for 2021:
Market outlook for Bitcoin
Market outlook for Bond futures
Market outlook for Crude oil
Market outlook for S&P500 Emini
Market outlook for EURUSD Forex
Market outlook for Gold futures
Video transcript
Introduction
Hi, everyone. I’m Al Brooks. Thank you so much for your attention. At the end of every day, I look at charts to try to get an idea about what to expect for tomorrow. I do the same at the end of the week, the end of the month, and now at the end of the year. This is the New Year’s Day weekend, and I made a series of charts to create videos to give my thoughts about what to expect for major markets in 2021. I made six different videos – Emini, the bond market, the Euro versus the dollar Forex market, gold, crude oil, and Bitcoin.
Now, I want to add a disclaimer up front: with every additional tick that we see, the outlook changes. I’m giving you my perspective as of right now, the start of 2021. I hope that you find the information useful.
Bond futures market outlook for 2021
In this video, I’m going to be talking about the bond futures market. This is my outlook for 2021, as of January 1st. Every tick that we get going forward changes the outlook, but at the moment, this is what I see.
Bond futures monthly chart
The bond market has been in a very strong bull trend for a number of years, and we have a bull channel. Different ways to draw it. I can connect these highs, and we’re right at the top of that. This is also around a Measured Move up based upon the height of this Trading Range. That’s another reason for some profit-taking.
I think what’s most interesting is, this series of bull bars here is the most extreme Buy Climax in the history of the bond market, and then in March we went up and we went down. That’s a reversal. We’ve been sideways since. The market’s deciding whether we’re going to continue higher or reverse down. It’s possible that we go higher. It’s possible that we go above this high. I doubt we’ll go much above it. In fact, I think we’re probably not going above it at all. I also think that interest rates will be higher 5 years from now and 10 years from now, and that means I think the bond market will be lower 5 years from now, 10 years from now.
For the bulls, they see this Trading Range as a Double Bottom bull flag, and they want a resumption of the bull trend. And for the bears, they see this as a Lower High, or a Lower High Double Top, and they want a reversal back down to the Buy Climax low, and then to the bottom of this entire leg up, and then eventually below the bull trend line and testing these Higher Lows – which would mean a substantial increase in interest rates.
Remember, this took 14 years to get to this point, so to get down to these lows, it’ll take 5 years, 10 years. So, a long time, and it’s possible that we could just stay in a Trading Range for a decade or more.
The most extreme Buy Climax in history
The most extreme Buy Climax in history. It’s likely that the market will test the bottom of the Buy Climax here. I don’t know how long it takes to get there. It might get there in 2021; it might take a couple years to get there. This high, I think 60% chance it’s the high for the next decade. 40% chance we could get above it. If we do get above it, I don’t think we’ll go much above it. You’ve been hearing on TV people talk about interest rates to zero and gold to infinity. America is not going to tolerate zero interest rates, so it’s not going to happen. So there’s effectively a cap on the bond prices, which means a floor on interest rates. We’re not going to go to zero.
This is 9 months. 9 months in a Tight Trading Range. The bears need to get a pair of big bear bars breaking below the bull trend line, and below the Double Bottom for traders to believe that we’re beginning a move down here – which is what I think we’re doing. But we may bounce up to this high first, and get a Double Top, and then a break below this low and then down here.
Bond futures weekly chart
This is the weekly chart. A very big Buy Climax. We went up big and down, down big and up, and sideways now for 10 months, 9 months. We’re at the apex of a Triangle. It’s a BreakOut Mode pattern. Hard to see, but this bar is inside of that bar, and this is a second consecutive inside bar. So we have an ii (inside inside) pattern. We have a bear breakout here. The bulls want the bear breakout to fail, and then they want a rally above the top of the Triangle, and they want to get up to this high. And they ultimately would like to get above the March high. They might get here. I do not think we’ll get there.
BreakOut Mode
This is a 10 bar, a 10-week Tight Trading Range that is also a BreakOut Mode pattern. So the Triangle is BreakOut Mode. This 10-week Tight Trading Range is BreakOut Mode. And that ii is also BreakOut Mode. So we have a nested BreakOut Mode pattern. That increases the chances that we’ll be getting the breakout soon. I don’t know if soon means a week or two, a month or two, but soon.
When there’s a BreakOut Mode pattern, I always believe 50% chance there’ll be a successful bull breakout, 50% chance there’ll be a successful bear breakout, and 50% chance the first breakout up or down will fail. And that’s where we are right now. 50% chance we’ll go up, 50% chance down, and 50% chance the first move will be a trap, and it will fail.
Hard to see, but this low is not yet down to this line, and the market might want to get to that line or a little bit below that line before traders decide on whether we’ll break to the upside or downside. So yes, we’re at the apex of a nested BreakOut Mode pattern, but we’re not quite to that line. None of these bars reached it, and we may have to reach it before we decide on the direction of the breakout.
If a market move fails twice, it often tries to do opposite
One thought I always have is if the market repeatedly tries to do something and fails, it then tries to do the opposite. For 10 weeks, we’ve been trying to break below this low and failing. We tried, we tried, we tried, we tried, we’re trying again. That makes me wonder if the market is going to try the other direction. So even if we get a bear breakout, if it’s only a week or two, a bar or two, you have to be prepared for a possible bull breakout and maybe a test up here over the next several months. It’s better to look at it as 50/50, but you’ve got to be thinking about the possibility that we keep trying to go down and we’re failing, and that always makes me suspicious that we’re going to go up.
If the bulls do get a reversal up, there probably will be a Double Top with this Lower High, and then we’ll probably break below this neckline of that Double Top.
I think 60% chance this March high will remain the high for many years, decades. So even if the bulls get a breakout above the Triangle, they’ll probably get a Double Top here. If they get a breakout above the March high, it probably will just be slightly above the March high, and not go up for a lot of bars. I think the breakout will fail. So either this is the high, or we’ll go a little bit higher, and that will be the high.
If we get a reversal, targets – this is a very strong reversal up, so that low is a target. And then the start of the final leg up is always a target because theoretically, bulls have stops below here. So if it starts going down, we will probably try to run those stops. So if we break below the Triangle, first target that low, and then this low. That’s also about a Measured Move down based upon the height of the Trading Range, the height of the Triangle.
Concluding comments
That is my take on the bond futures market for the coming year. 5 to 10 years from now, bonds will be lower, but in the interim, in the next year or so, it’s still possible that we could bounce for several months before we go down.
Close
Again, I’m Al Brooks. Thank you so much for your attention. I hope that you found some of this information useful. I want to wish you the best for the coming year as a trader, and I also want to wish you and your family a very wonderful 2021.
