Cramer says charts suggest long tie may be “hammered” in coming weeks

CNBC’s Jim Cramer warned Tuesday that Wall Street could be worried about possible short-term moves in the bond market.

“The charts, as interpreted by Larry Williams, suggest that long-term Treasury bonds are about to be phased out over the next few weeks,” the “Mad Money” host said. “You better believe that this will have negative consequences for the stock market … because it often portends Fed rate hikes. After this big rebound and record after record after record, that’s the l ‘last we want to see right now. “

Cramer said Williams provided multiple charts that give credibility to the prospect of a near-30-year Treasury price drop, known as the long bond, that would lead to higher yields as they move inversely.

One factor at stake is seasonality, as Williams, a longtime market technician, noted that “over the past few years, Treasury bonds have a clear tendency to start falling in late August and early August. of September, “Cramer said. “If this pattern is met this year, it would mean we are about to see a significant rise in long-term interest rates.”

However, Cramer acknowledged that seasonal patterns are not perfect and it is important to take into account other indicators, such as the Commodity Futures Trading Commission’s weekly reports on traders ’commitments.

Analyzing these reports on Treasury futures, Cramer said Williams likes to look for divergences in the buying and selling decisions of small speculators and large trading players.

“Small speculators, who represent the public, have risen more and more in long-term treasuries, while commercial hedges (mainly banks) have thrown them left and right. In a situation like this, someone has to be wrong and, according to Williams, it’s not usually the commercials, ”Cramer said. “Who do you think has a better understanding of the bond market: the public or the plutocrats? My money is always for the plutocrats.”

There is also worrying information about future 30-year Treasury prices on the technical indicator known as balance volume, Cramer said.

“If something manifests, but there is no follow-up from the equilibrium volume line, he tells Williams that this concentration is likely to be short-lived,” Cramer explained. “Indeed, when you look at the Treasurys concentration earlier this summer, bond prices hit new highs, but the equilibrium volume line remained flat. For Williams, that’s another sign that these levels are likely. they will be ephemeral. “

The 30-year Treasury yield stood at around 1.917% on Tuesday evening. Yield was above 2.3% at the beginning of June, but since then it has been declining.

“Put it all together and we could be seeing a significant drop in bond prices, which translates into a significant increase in long-term interest rates,” Cramer said. “You could read it as a sign of a strengthened economy, or a sign that the Fed needs to strengthen because inflation is rising again, or just a sign that there will be less foreign money flowing into our bond market.” .