The weekly bar chart you see above (courtesy of CRB charts) is our current foldback chart for the t-bond futures. The foldback line is the bar of the all time high on June 16, 2003 at 123-03.
This chart so far has been good predicting highs but not too useful for lows. In this business we appreciate whatever help we can get so let's see what the foldback says about the t-bond highs going forward. When evaluating a foldback chart you always first want to check its accuracy against past turning points as a test of your choice of the symmetry or foldback point.
Point A is the October 8, 2002 high around 115 which preceded an 8 point drop in futures over three weeks. This top was 251 calendar days prior to the June 16, 2003 top at 123-03 (our choice for the foldback point). Projecting 251 days forward from June 16 gives us point AA on February 22, 2004 as a projected top. The actual top occurred on March 17, 2004 at 116-12 and was followed by a 2 month drop of more than 13 points to 103.
Point B is the November 1, 2001 top at 112-18. This occurred 592 calendar days prior to the foldback point and 592 days after the foldback brings us to January 30, 2005 as a projected top. On February 9 the market reached a high of 117-12 and then dropped 8 points in 6 weeks.
These two foldback projections averaged 15 days early, not too bad for such long term projections. So we proceed to calculate a projection for a top, point CC (not shown on the chart) using point C, the March 22, 2001 top at 107-08. This occurred 816 days prior to the June 16, 2003 foldback point, so adding another 816 days brings us to September 9, 2005 as the projected time for a top. The last two foldback top predictions averaged 15 days early so on this basis we adjust our prediction to September 24, 2005.
This projected top is about a month later than the top projected by our 2005 bond market forecast using completely different methods. Let's see how it turns out!