Treasuries, The Flight to Safety Trade

These TLT charts, which is 1 of 3 assets used in the SPY Arbitrage model is performing better today for a reason and in looking at TLT both shorter term and longer term, the entire market is mapped out for you. When looking at these charts try to remember the breadth charts, the 3C charts, this morning's Macro-Economic Surprise chart vs. Market Breadth, a similar them,e will emerge among all of them that can be summed up nicely with TLT alone.


This is a very simple explanation, but shorter term 3C charts reflect shorter term or near term activity, longer term charts reflect the overall trend or flow and what we expect the major moves in the market to be.

 Intraday shorter term 1 min TLT shows a leading negative divergence forming as the day wears on, this is why Yields have recently begun to perform better and are more supportive of the market as I just mentioned in the Leading Indicators post. This also means that there's a short term shift AWAY from the safety of bonds and in to risk assets by smart money, they are ready for a market move higher in the near term as we expect and are prepared for as well.

They say it isn't the news, it's the market's reaction that matters, look at CAT's earnings today and price up 2.5%, what does that tell you with today's reaction about risk sentiment?

 The 5 min TLT chart shows a leading negative divergence at the same area our Inverse H&S base would be in the market, we already know smart money accumulated, I showed you last night, but they moved out of the safety of TLT and in to risk assets for the move.

 TLT 10 min chart again shows the same thing, money flowing out short-mid term and in to risk assets, this isn't retail as they wouldn't have considered buying until Friday, this is smart money.


However if we want to know what the primary trend or bigger trend has been, look at the daily TLT chart, stronger than any above and it has shown a strong flow to the flight to safety trade, in to TLT and TLT has moved up because of this demand despite the market being up at the same time, this tells us the bigger picture is one of a lot of fear among smart money that the market is going to crash and there are tons of confirming indications and a lot of catalysts as to why, the Yen was one I covered last weekend.