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I’ve mentioned this in the past that when TLT and SHY start to show up on my momentum scans that the market is usually nearing a trading bottom. However the action in these two markets have been acting slightly odd lately.¬† They normally have an inverse relationship¬† as shown by the Dow chart layered behind the 20 yr bond for a better visual. As the TLT is rising the Dow falls and then at some point TLT tops and the Dow bottoms out as shown by the arrows pointing out each major top/bottom over the last few months.

However, over the past week they’ve been rising in tandem. To be honest, I really don’t know what to make of this but I wanted to point it out as it caught my eye.

Any thoughts as to how this might play out?


2 Responses to “Closer Look at Action in Bonds”

  1. headlinecharts Says:

    Hi, ordinarily I wouldn't touch stocks when the 10Y yield is hitting new lows. Stocks will generally follow the yield lower. Stocks are getting a bit overbought too, and I'm thinking a pullback in stocks is close.

    But, like you said, this move in the 10Y looks like a blow out meaning the yield may be close to at least a short term bottom, so I'm not so sure when stocks pull back… it may be a buying opportunity for stocks. The US Dollar has weakened a bit and that works for stocks, along with the VIX failing to hit a new high and now below both the 10-day and 21-day. That works for stocks too.

    Bottom line, when stocks pull back, I'm watching the 10Y yield, and if it shows some strength, I'm a buyer of stocks.

  2. mark Says:

    Think about china.
    They have like 500,000,000,000,000$, and their plans are buying Treasury bonds just to not to use that huge amount of money and screw the dollar value.
    Its normal that during a while they try to get as much as they can on treasury bonds, buying even so near to no-discount rate.
    3 year sight investment? wait.
    Stare at bonds, market will go down taking in the count the next dollar crisis. When bonds get really low, buy.
    Then, you will have really cheap bonds that you will not be able to exchange in 5-10-20 years.
    But if the states recover their commercial strenght, that bonds will rise like pumpkins in the yard.
    The situation about bonds is quite simillar to what happened in germany after the first world war (usa external debt is comparatively bigger than germany war debt, so more risks, but also could be more benefit).
    A must read author: André kostolany.


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