Is The Market Still Bullish on Bonds?

Is the market still bullish on US Treasury Bonds? There was a lot of discussion today about blow off tops in bond prices or that yields could not go any lower. Others were stating that the strong bond market is signaling the equity market that it should get ready to move lower still. So which is it. Here is one view from looking at the activity in the iShares Barclays 20+ Year Treasury Bond ETF ticker: TLT and its bearish half-cousin ProShares Ultrashort Lehman 20+ Year Treasury ETF ticker: TBT. Understand that these are not mirror images of each other but are liquid trading vehicles used by professionals and a decent proxy for the view on Bonds. Look at the charts over the last 4 months:

iShares Barclays 20+ Year Treasury Bond ETF, TLT


ProShares Ultrashort Lehman 20+ Year Treasury ETF. TBT


TLT has been been in a channel between 98 and 102 over much of this period but in a rising trend the month of August. Volume has been fairly steady throughout this time frame. During the recent rise the RSI and MACD have been trending up along with the price. Today there was a big gap up and strong candle today but volume did not change today. This would lead you to believe that today's move was not a blow off top.

TBT has been trending downward but found a range over mid June to the end of July. Volume was steady over that time period. For the month of August the trend has been down and volume has not changed much. During the recent downtrend the RSI and MACD have been trending along with the price. Today there was a big gap down and strong candle with increasing by more than 75% over the recent trend. This might make you consider that a blow off bottom was occurring.

So which one is it? Is the run in Bonds done or is the move higher poised to continue? How about a different explanation. If you are confused as to which answer is right isn't it possible that the market is confused also?

Let me suggest a different explanation as to what is happening. Holders of TLT believe that bond prices can still go higher, meaning that yields move lower. They are unwilling to sell their holdings due to their conviction. Holders of TBT may be in one of two camps. The first one is betting that prices have topped and yields are going higher. In the second camp are those that are holding TLT that are hedging their bets by going long TBT. This is the new money added or increase in volume today.

So perhaps the balance between the long view and short view on bonds is shifting, but only slowly with the longs just hedging their bets. The tell will be what happens on the next move.

Top 10 Ideas For the Week of June 21, 2010

Reviewed over 500 charts and posted over 150 this weekend. It was an interesting quadruple witching week. Gold is just flying, no questions about it, and the dollar appears to need some more time to consolidate. Oil and the equity indices all seem to be in ranges and need to be watched carefully. When they break the range they will move and you need to be ready. With that backdrop here are some ideas for the week in no particular order.

1. Apple, ticker AAPL


Broke out of a symmetrical triangle and made a new high. Price target is now 300.

2. Rambus Inc, ticker RMBS


Bear flag after a big drop, bodes for another drop. Target is 15.

3. ProShares Ultra Short 20+ Treasury, ticker TBT


Descending triangle completing, watching 37.50 for a break out. A break lower would have a target of 30ish.

4. American International Group, ticker AIG


This stock has historically traded off of Resistance/Support. If it breaks 38 expect a run to 43.82 - 44.82 and beyond that then 54.20/55.90. Above 55.90 there is clear air. Support is at the 200/100SMA.

5. Intercontinental Exchange, ticker ICE


Trying to break out of ascending triangle formed by SMAs and 122.50, target on break out and hold of 130 is 160.

6. Mastercard, ticker MA


215 is a crucial level to watch and can play either way. A break and hold higher sees 227 - 230. Failure sees support at 195 below.

7. Delcath Systems, ticker DCTH


A break below 8.75, leads to 6.93 next and further support then at 6. Make sure it sticks below 8.75 to play.

8. Cliffs Natural Resources, ticker CLF


Rejected at the 100SMA with the 50SMA driving down. Looks to test 200SMA again.

9. Lululemon Athletica, ticker LULU


Strong move higher. 50 is the next resistance and through there can try 60. Support at 44 below and then 39.81.

10. Shanda Interactive Entertainment, ticker SNDA


Descending triangle with support at 38.20. Volume declining, doesn't look good. Support below is at 33.70 - 34.00 area the 30.83. Resistance at the 50/100 SMA convergence at the downtrend line near 43.15 and 200SMA above that.



Bonus Idea: Sears Holding Corporation, ticker SHLD
Daily Chart


Under 76.80 now will see resistance at 70 below.

Trade'm well this week.