30 year treasuries had a very strong auction this week, it seems high quality collateral is in demand as well as perhaps the notion of offsetting longer term deflation expectations.
In any case, we have had at least two recent Trade Ideas long TLT that have served us well after the October pullback we saw coming several days before.
In red is the pullback area we had seen several days before, anticipating a pullback that we'd be able to buy, we started seeing positive divergences in strong timeframes at the white box area, however on a short term basis, it looks like the probabilities of a near term TLT pullback are rising,
although the position on the whole still looks very strong beyond a near term pullback which may offer opportunity for those interested.
This may also have some use in near term market analysis as well, although I'm not making that jump based on TLT alone.
Since our first long entry on November 14th at the first white arrow from the left, in which we used TBT (the 2x inverse TLT ETF) as a short to effectively construct a 2x long TLT position as there aren't any 20+ year leveraged ETF's with any decent liquidity. This was the November 14th position/post,
Trade Idea (Swing+) TLT long via TBT Short and again on December 3rd at the second white arrow,
TLT Long Also Looking interesting here was posted.
Since the November position was opened, TBT short, effectively TLT 2x long is up almost +11%
I know some of you opted to use options (calls) for the additional leverage and while the near term potential of a pullback in TLT (20+ year Treasuries) isn't a pressing concern for a 2x leveraged equity position, it is more of a concern for option positions holding decent gains with time decay also a factor.
Let me reiterate, the TLT chart overall looks very strong and solid for more upside, what I'm really looking at right now is the probability of a near term pullback.
This 2 hour chart of TLT shows its long term strength, I have little concern about that at this time.
The 60 min chart that showed the pullback area, accumulation at the pullback lows and now confirmation of higher prices is also showing significant long term strength. However...
While a small divergence (to the far right), there is a 300 min negative. It's not so much the divegrence on this chart, but the shorter term charts it migrated from that cause some more immediate concern toward a pullback, especially for those using the leverage of options with shorter expiration dates like December, although I prefer to take gains in options at the first site of a loss in momentum and look to re-enter a new position after the correction is complete rather than sit through it as options have a much different pullback/volatility rate than do equity positions for numerous reasons, not the least of which is time decay.
The 10 min chart is much clearer about the negative divegrence and this is about where I see the threat and it being the nature of a pullback.
My initial gut instinct is the $122-$123 area would be targeted in a pullback, but the time decay may be quite a bit.
As far as the near term timing charts, this 3 min TLT is clearly negative as is the 2 min and...
This 1 min so I anticipate the probability of a near term TLT pullback to be rather high.
As for 30 year Treasury futures which are similar to TLT's 20+ year Treasuries...
Again the longer 60 min chart is rock solid so I don't see this as a trend reversal and I anticipate TLT and 30 year bonds will see additional upside after a near term pullback which may be quite ordinary as pullbacks within a trend are not anything uncommon and often wring out excesses and shakeout weak hands, making them stronger in the long term.
However, like TLT at the 30 year Treasury future's 30 min chart, a negative divegrence is obvious,
The 5 min chart also shows a negative divegrence suggesting it is close to a pullback area.
Just for additional confirmation, this is TBT, 2x short 20+ year Treasuries) or effectively 2x short TLT and its 60 min chart shows the exact opposite signal as it is confirming the downside, so again I think TLT's longer term is secure, but again like TLT and ZB (30 year Treasury futures) ...
After giving perfect confirmation to TBT's downtrend and showing distribution at the onlt real bounce attempt , the 15 min chart has a positive divegrence.
This is multiple timeframe/multiple asset confirmation.
Again, I would think we are close to such a pullback, it looks high probability, but the longer term is also looking very strong, thus a pullback in TLT may offer an excellent long entry if you are interested once it has completed. You might want to set price alerts around the $122-$123 area for TLT if you are interested.
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