SEC Wants to Tame Bond Markets. Fact Is, They’re Already “Tamed” :: Elliott Wave International

“Pain Trading”: This is what some call the erratic performance of Treasury notes in 2022. But if bonds were the “pain”, Elliott Wave Analysis was the “pain reliever”.

by Nico Isaac
Updated: September 13, 2022

As a child, I had a crippling fear of thunderstorms. Every gurgle and wail that echoed through the sky sent shivers down my spine. And with the first reverberating hit, I would run straight to my parents’ room and hide under his bed crying.

Then one stormy night, my mom got under the bed with me. She told me that if she counted to 5 between each clap of thunder, that meant the storm was 1 mile from our house. As the seconds between each shot lengthened, I could imagine the storm getting further and further away from me.

This simple counting trick was very enriching. It allowed me to gain a sense of order over what I previously saw as a chaotic threat beyond my control. I still count lightning strikes to this day!

Now, what about financial market trends?

According to the prevailing wisdom rooted in “fundamentals”, markets move according to the logic of “good” and “bad” news and events. For example, a negative earnings report leads to sell-offs, while strong growth leads to rallies.

But time and time again, prices go against this formula, thus reinforcing the idea that markets are random. That’s another popular belief, by the way.

Frankly, that sounds scary. Like running and hiding under the bed, it’s scary when the “x” market violently crashes to the ground like lightning without warning.

In fact, that’s exactly the meaning we get from the most traded bond on planet Earth: the 10-year Treasury bond. On March 24, Reuters coined a new phrase for the type of volatile stock that gripped 10-year notes in 2022: “pain swap.”

And, on September 14, the Securities and Exchange Commission will step in to propose new rules for trading in the Treasury markets. The hope: These reforms will restore order to an unusually chaotic market. On September 7, Reuters covered the SEC’s multiple plan:

“As Treasury debt continues to grow and Treasury brokers’ market-making ability remains limited, the The Treasury market remains highly vulnerable to further dysfunction under stress, Regulatory experts, including former Treasury Secretary Tim Geithner, warned in a report this year.

“With the Fed beginning “quantitative tightening” in June, letting its Treasuries come to maturity without buying more, the market has experienced sudden price changes.

“US regulators have been working on reforms to the structure of the $23 trillion Treasury market following a series of liquidity crises, including a collapse in the market when the COVID-19 pandemic shut down the US economy. USA in March 2020.”

There is only one problem with this plan; that is, politicians believe that the “wild price swings” of bonds will be corrected with new rules and order. But the fact is that these markets have already been following the rules: the Elliott Wave rules, that is.

We are talking about patterns on the price charts. For example, on June 22, our Professional interest rate service showed this chart of 10-year Treasury note futures prices. The forecast was clear: price had completed a wave three impulse move within a larger five wave motif pattern.


This meant that the stage was set for start a rally in a wave four correction.

Wave four corrections are among the most recognizable corrective patterns because they often follow the guidance defined here at Elliott Wave Principle – Key to Market Behavior:

“The main guideline is that [wave four] corrections… tend to register their maximum retracement within the travel span of the previous fourth wave of a lesser degree, most commonly near the level of its terminal”.

On June 22, Professional interest rate service used this guide to anticipate how far the wave four move would go, writing:

“US Interest Rates: Has a Reversal Happened?

“Three wave advance from 114^10 is likely the start of wave 4… If correct, the market should continue to move sideways in the coming days. Wave 4s often find resistance in the 4th wave area of a lesser degree. In this case, wave (iv) ended in 120^20so we should look at this level as potential resistance.

From there, the 10-year note actually rallied in the ride period of the previous fourth wave; in turn, on July 28, Interest Rate Pro Service warned that the move up was near the crucial retracement level. Our forecast for 10’s was clear:

“The next segment of the rally should exceed 120^16, but will bring the [move] which has been underway from mid-June to the end.


The chart above shows what followed: the 10-year note set a top on August 2 and a bearish reversal followed. August 2nd, Professional interest rate service he warned bond investors that “the push to a new high is likely to mark the resumption of the biggest decline…and the start of wave 5.”

And this is what has happened since then: Falling prices and rising yields have followed Elliott Wave rules all the way to the Treasury!


Meteorologists are notorious for telling us to bring an umbrella on a sunny day, and Elliott wave analysis isn’t perfect either; no market forecasting method is. But there is no denying the fact that there is much more order in markets that are supposed to be “random” or driven strictly by news.

When market gyrations seem to be out of control, investors freak out and the powers that be devise rules and reforms to put price action in its place.

But as I learned as a kid with thunder, you can sometimes count to “5” between waves and know how far away the next potential opportunity to strike is.

Our Professional interest rate service it stands on its own for that very purpose.

From 10-Year Treasury Bonds to Eurodollars: Your Opportunity Awaits

Is there a way to survive the volatility in the bond markets?

Yes. But even more than that, there is a way to thrive: having an objective model to identify and interpret ongoing short-term and long-term trends.

Our Professional interest rate service publishes intraday, daily, weekly and monthly analysis of the world’s major currency pairs, so you can experiment with the time frame and market that suits you best.

Sign up today!

4 ways EWI’s Interest Rates Pro service lets you trade with more confidence

1. If it’s a major bond market, it will be early.

Covered Markets: US: Treasuries, 10-Year Notes, 5-Year Notes, Eurodollars, ETFs.
Global: Bund, Bobl, Gilt, Australian 10-Year, Euribor, Schatze.

Their Professional interest rate service Underwriting puts a veteran Elliott expert in the fixed income market at your side. His goal is to make sure that, day by day, hour by hour, you see the latest wave picture. You get intensive intraday coverage, to help you take advantage of short-term opportunities, and daily forecasts that put you in front of longer-term waves.

2. You’re ready for the odds with insightful videos

Once a week, their interest rate analysts shoot a video to break down the week’s action and help you see what’s most important about what’s next. Not only will you get Elliott Wave analysis and insight in detail, but you’ll also get alternative scenarios and veteran insights to help you better understand the nuances of each fixed income instrument. Result: You’ll see what’s most likely to happen next, so you can be ready to act on the odds.

3. You get an essential weekly perspective

With Elliott, context can be key. Their Professional interest rate service Subscription gives you broader analysis to help you manage, or at least consider, major trends – trends that can last for years. This essential perspective puts short-term moves into context. Together, they get a complete Elliott Wave picture for bond markets at each tradable trend grade. Then each week, market veteran Murray Gunn publishes his Interest Rate Outlook column drawing his attention to an overlooked but powerful wave-generated undercurrent that moves money markets. All of these columns add up to an essential and unparalleled perspective for any serious bond trader.

4. You become part of an exclusive community of smart Elliott Wave traders

We are on your side and working for you. If you have any questions about the wave principle or our analysis, please email us. We’ll update the next post or video so you and your fellow subscribers get the clarity you need.

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We know we are successful when you understand the Wave Principle and our analysis. We will do what we can to make sure that happens.

Please note that we do not provide individualized services, assistance or advice in relation to investing or trading in any way.

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