Treasuries

Remember this post? Or This one? (focus on the TLT chart) How about this one? There actually have been quite a few all focussing on treasuries and specifically what looked like a stealth move into treasuries. This would certainly run counter to what the biggest bond investor out there is doing (Bill Gross/Pimco), but ever since we first looked at TLT, it was showing bullish inclinations. It seems the market is delveraging risk so that money has to go someplace. Gold would be an obvious pick in an inflationary environment, although the trend there recently hasn't been as strong as I would expect. Long dated treasuries seem to be a perfect match as you'll see in following charts.


Ever since I posted these two charts on February 14th (we had a short in TLT and a long in TMV until I posted on Feb. 9th , "Both are at a small profit, but I'd close them down until we get some clarity on the recent surprising action in the bond market." ), something changed in the bond ETF's.


Here's the Feb 14th post...

Using TLT as a proxy for the 20 year, note the bullish wedge which is one of the reasons I began to grow skeptical of the trade. The wedge is accelerating recently. 

30 min 3C chart of TLT-a change coming? 

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Only a few days before we had a short on TLT/ long TMV. Then came these charts on 4/26

 This look a lot like the classic H&S bottom or inverse H&S, from here upside volume would have to pick up.

 The daily 3C chart seems to like this as a significant base.

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There were several other posts since-linked at the top, but lets take a look at the bond ETFs today.

 TBF short the 20 year Treasury- breaking down out of a H&S top

 TBT-UltraShort 20+ year Treasury-Also breaking down out of a H&S top

 TMF 20 year Treasury Bull 3x leveraged, breaking out of a H&S bottom

 UBT Ultra 20+ year Treasury- Breaking out of an inverse H&S bottom

 TLT 20+ year bond ETF vs the SPY in red.

 TLT's daily 3C chart, but notice volume is very low for a breakout of an inverse H&S. I mentioned in an earlier post, there seemed to be stealth accumulation, meaning that volume was being kept low as to not attract attention.

And here's the descending wedge that I saw and decided to end our short trade in TLT and long in TMV. The price pattern implied target is $108. It seems that the shorter maturity bond funds aren't seeing the same upside as the 20/20+ year funds. If you like the idea of this trade, since there's limited upside in TLT I would consider the 3x leveraged TMF which gained 3% today. The upside in TMF would be approximately 36% from here, although I suspect a pullback is coming in the next few days.