Hello Trouble in Bonds

The h-pattern is back! Hell for bears in bull markets and hello lower prices in bear markets.

I've added the volume profile here to highlight there is some support just below current prices on ZB, but not much after. The market wasn't ready for a clean break of the lows today. I'm agnostic on bonds here. My view is financials are doomed either way because either rates go lower and financials sink, or rates go higher very fast, which is also very bad for financials because their assets depreciate faster than income payments come in. ZN is much more advanced and has much less support ahead of it. I posted mortgage rates earlier. The housing market is doomed in one sense, and will absolutely awesome for first time buyers if rates break out of their basing pattern. May they unleash a wave of destruction on speculators and investors gobbling up supply.

KBE held up similar to ZB today and didn't take the plunge.

The potential island reversal on BLK remained intact.

Banks Test Low for 2022

I don't think banks are going to do well if long-term rates rise or fall. My sense is bonds should rally here and that will kill financials. Yet if I'm wrong and bonds go lower, there's no support and the bond bull maket may already be over. In which case, dial up the 1970s charts of banks. The banks should hold up better than in 2008, but they also won't receive a bailout. It'll be years of wealth destruction until inflation and interest rates finally peak.

Doomed Banks

As I've said with other bank posts, most of these patterns repeat over and over. Not every example is included. I'm barely into the As and I've already seen several that looks like ABCB.

For ETFs, I like the KRE April 14 $68.50 put for ultra aggressive speculators (if you like taking 100-percent losses in pursuit of 500-percent or more gains) expecting an immediate drop and the KBE May 20 $50 put for those who are highly aggressive. More charts after the jump below.

Next Shoe Is Financials

Financials perform poorly in sustained high inflation and deflation. High inflation should take time to emerge. In the near-term, the next shoe to drop in a market correction would be bonds regaining their defensive staus. A rally in long bonds will take down the financial sector. With that in mind, KRE went back below resistance today. KBE and XLF included for context. This isn't really a chart short and not a big position of mine, but it is something to consider if bonds start rallying amid a deeper correction.