Time To Short Bonds?
Dragonfly Capital | Jan 31, 2013 12:34AM ET
I have heard that a lot lately. And Treasury Bonds are looking weak. The daily chart of the Treasury Bond ETF (TLT) is showing a break of a support area from 117.50 to 118.50 with Tuesday’s closing price. Price levels not seen since May 2012. And all of the Simple moving Averages (SMA) are pointing lower. In fact there was a Death Cross on Friday.
Ominous right? The next gap area lower forms between 111.70 and 112.70. $5 is some good coin.
But the monthly chart may temper your enthusiasm to bet on the demise of Bonds.
The bullish Andrew’s Pitchfork that has been in control since the ETF started shows that all that has happened is the Median Line attracting price and then a slight overshoot. This happened back in May 2012 as well before it launched higher, and boy does that 10+ year uptrend look strong.
But there are some cracks in the story. The Relative Strength Index (RSI) is making a new lower low from the last touch at the Median Line and continuing down, with a Moving Average Convergence Divergence histogram (MACD) that is negative this time and growing.
The MACD signal line is also pointing lower. This view shows that it will be tough to gain traction until it falls below 108. And looking at actual Treasury Bond Prices shows that the long term rising channel from 1994 is in control.
Yes, it is pulling back from the top of the channel and the RSI and MACD support a further move lower.
But the 135 level, 7 points lower, will need to fail to provide support before there is a chance at the bottom of the channel, much less a bearish movement long term. So go ahead and get a little short. But it is not time yet to bet the farm on a collapse.
Disclosure: The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Original post
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.