The Four Pillars Trading Solution Morning Note: April 14, 2014

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April 14, 2014

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The recently equity sell-off has been quite severe for the former high flyers.

If you are wondering when the stock market decline will be over, I suggest watching bonds.

Over a week ago, I wrote that while traders were fretting over equities and precious metals, bonds were the highest probability trade at the time. 

We are long TLT:

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am_tlt

Bonds have been forming very consistent daily Arcs, that are much easier to trade than consolidation patterns.

Now that our expectation of a new high was met, bonds should start to decline at any time, likely sometime this week.  Please note the indicator non-confirmations of the new price high, marked in the pink downward sloping trend lines.  Once the top is in, I expect a few weeks of downside.

The next swing high may mark the top in bonds, a top that will likely coincide with a tradeable equity low.

Watch signs of a bond top in order to find a low in stocks.

Thanks for stopping by and have a great trading day!

- Geoff

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