{"id":18656,"date":"2021-07-09T07:30:01","date_gmt":"2021-07-09T11:30:01","guid":{"rendered":"https:\/\/www.jeffclarktrader.com\/?p=18656"},"modified":"2021-07-09T07:30:01","modified_gmt":"2021-07-09T11:30:01","slug":"read-this-before-you-buy-treasury-bonds","status":"publish","type":"post","link":"https:\/\/jeffclarktrader.com\/market-minute\/read-this-before-you-buy-treasury-bonds\/","title":{"rendered":"Read This Before You Buy Treasury Bonds"},"content":{"rendered":"

By Jeff Clark, editor, Market Minute<\/em><\/strong><\/p>\n

The Treasury bond market has moved from one extreme condition to the other.<\/p>\n

The last time we looked at Treasury bonds was back in March<\/a>. Back then, longer-term interest rates were moving higher (which causes bond prices to fall).<\/p>\n

Just about everyone was expecting that trend to continue…<\/p>\n

But, when we looked at the iShares 20+ Year Treasury Bond ETF (TLT), we noticed it was extremely oversold. And, it was overdue for a bounce.<\/p>\n

Since then, interest rates have fallen and bond prices have rallied. TLT is up more than 10% in the past four months – which is one heck of a move for a government bond fund. And, conditions have gone from extremely oversold to extremely overbought.<\/p>\n

Take a look at this chart of TLT with its Bollinger Bands<\/a> (BB)…<\/p>\n

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Bollinger Bands indicate the most likely trading range for a stock. Whenever a stock trades outside of its BB it’s in an extreme condition that’s likely to reverse.<\/p>\n

If you look closely at the chart, you can see that TLT closed below its lower BB in mid-March. That move was the bottom for TLT. It marked the end of the decline phase, and the start of a new Treasury bond rally.<\/p>\n\n\n\n
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Free Trading Resources<\/strong><\/p>\n

Have you checked out Jeff’s free trading resources on his website? It contains a selection of special reports, training videos, and a full trading glossary to help kickstart your trading career \u2013 at zero cost to you. Just click here<\/a> to check it out.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Yesterday, though, TLT traded well above its upper BB. This is an extremely overbought condition. And, it creates a vulnerable setup for Treasury bonds.<\/p>\n

TLT has enjoyed a magnificent bounce over the past four months. Many of the financial television talking heads who were bearish<\/a> on Treasury bonds back in March have turned bullish<\/a>.<\/p>\n

But, the look of this chart suggests investors should be careful here.<\/p>\n

At the very least, with TLT trading far above its upper BB, it’s going to be hard for Treasury bonds to sustain much more of a rally from here.<\/p>\n

And, if the current overbought condition marks the end of the rally phase, then the coming decline could be significant.<\/p>\n

Best regards and good trading,<\/p>\n

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Jeff Clark<\/p>\n

P.S.<\/strong> Every week, my colleague and market analyst Eoin Treacy discusses what’s been happening in the markets lately.<\/p>\n

Last week<\/a>, he talked about bitcoin, inflationary pressures, and where copper is heading… and today he has another video out. Click below to watch it.<\/p>\n

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Eoin’s Insights<\/h2>\n

Happy Friday Market Minute readers. Today, I have another brand-new presentation on what\u2019s been going on in the markets this week.<\/p>\n

There\u2019s quite a few things to cover today\u2026 I\u2019ll be going over the trend in volatility, a potential breakout for Google, growth in Chinese companies, and how carbon credits are linked to inflation. Just click below to watch.\n<\/p>\n

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