![\"Image\"](\"https:\/\/cdn.jeffclarktrader.com\/JMU\/images\/202310\/20231017-JMU-01.png\")
<\/p>\nThe decline in T-bonds over the past three months has been epic.<\/p>\n
The iShares 20+ Year Treasury Bond ETF (TLT) is down 15% since mid-July. That’s an incredible amount of wealth destruction for an asset class that is considered a safe haven.<\/p>\n
And as the Fed holds interest rates higher over the long term, Treasury bonds are headed even lower.<\/p>\n
Currently, treasury bonds are trying to find a bottom. But, in the short term, they’re due for a bounce.<\/p>\n
Look at this chart of TLT…<\/p>\n
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At the low in early October, TLT was trading far below its 50-day moving average line (blue line). All of the momentum indicators at the bottom of the chart were in deeply oversold territory. So TLT was setting up for at least a modest dead-cat bounce to relieve the oversold conditions.<\/p>\n
That bounce happened last week as TLT rallied back up to its 20-day exponential moving average (EMA) just above $88.<\/p>\n
To create the sort of bottom formation that sets up a more significant rally, TLT needs to come back down and make a slightly lower low, while the momentum indicators hold above their recent lows. This will create the positive divergence that often precedes a change in trend from bearish to bullish.<\/p>\n
The dotted black lines on the chart show how the price action could play out.<\/p>\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<\/p><\/div>\n<\/div>\n <\/p>\n There are no guarantees, of course. But we do have the potential for a strong year-end rally in Treasury bonds.<\/p>\n That doesn’t mean traders should buy TLT at Friday’s closing price of $87.61. But if the fund sells off enough to make a slightly lower low (below $85) and the momentum indicators make higher lows, then we’ll have a low-risk\/high-reward setup.<\/p>\n That’s when traders should look to buy TLT in anticipation of a multi-week rally phase.<\/p>\n Best regards and good trading,<\/p>\n Jeff Clark<\/p>\n <\/p>\n![\"Signature\"](\"https:\/\/files.jeffclarktrader.com\/global\/signatures\/jeff-clark-signature.png\")
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