We didn’t get the bounce in the Treasury bond market I was looking for one month ago. The prices of risk-off assets have fallen right along with the stock market.
In fact, some folks will argue that it’s the relentless decline in Treasury bonds that’s causing the angst in stocks.
Government bonds were oversold one month ago. They’re more oversold today. Now though, they seem to be in a better position for a bounce.
Take a look at this updated chart of the iShares 20+ Year Treasury Bond Fund (TLT)…
At the low last week, TLT had given back all of its gains from over the past year. It was testing support near $138 per share. And, it was quite stretched below its blue 50-day moving average (MA) line which was at about $150.
TLT rarely strays more than 5%, or so, from its 50-day MA before reversing back towards the line. At $138, TLT was about 9% below the line. So, the proverbial rubber band is likely to snap back soon.
TLT bounced off of support late last week and immediately ran into resistance near $143. Resistance held, and TLT has drifted lower this week – closing Wednesday at just about the middle between support and resistance.
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This action is setting the stage for a possible bounce.
You see, if TLT can hold above last week’s low, then it will form a “higher low” on the chart. That’s the first step to establishing a tradable bottom.
Then, if TLT can rally above last Friday’s high of $143, the chart will form a “higher high.” That step will confirm that, at least, a short-term bottom is in place.
From there, TLT should be headed back up towards its 50-day MA near $150.
That’s not going to start a new bull market in Treasury bonds. But, it could create a nice short-term profit for traders willing to take the trade.
Best regards and good trading,
Jeff Clark
Mike’s note: Mike Merson here, Jeff’s longtime managing editor. I’m writing to tell you about an exciting event happening next week…
Next Wednesday, March 10 at 8 p.m. ET, our colleague and master hedge fund trader Larry Benedict will reveal an unusual trading secret.
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Just sign up for the event right here to make sure you’re in the know. And now, onto our mailbag…
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Hi Jeff, I want you to know that your email is the first thing I read in the morning. Your work and insights have been right, and on time for what I need to know – every time. Thanks so much.
– Lilian
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