A Long-Term View On…US Treasury Bonds

US Treasury Bonds have been the gold standard of the debt world for many decades. The risk free rate. Maybe this is about to change, or maybe not, but with the size and potential of the US economy they will always be important. Treasury Bonds (TLT) can give a reflection of inflation expectations and economic activity. As their price moves up their rates move lower in an inverse relationship. The big dogs hunt in this field.

Before Kevin Ferry (@fearlicious) jumps in to remind us, for stock traders we have an imperfect but very highly correlated vehicle to trade them in the iShares ETF. So what does that vehicle tell us? Is the long talked about and anticipated reversal in prices here? The daily chart below certainly looks a bit ominous. After making a high in July, the bounces since have made a double top at 127.

But it has also found support at 119.60 each time, outside of a brief dip below for 2 days in September. The Relative Strength Index (RSI) and Moving Average Convergence Divergence indicator (MACD) are both pointing to lower prices. And with the price below the 200-day Simple Moving Average (SMA) this could be the big one.

The 200 SMA has acted as support since May 2011. The key on the daily chart is the 117 low in September. Underneath that makes the downside more certain. Moving out to the weekly view adds a lot of value. There is no imminent crash in prices here. There are cracks in the bullish case with the RSI testing the mid line and pointing lower and the MACD reversing back negative, but that same 117 level looks a lot more solid.

It also shows a break below with 112.50 and the 107.5 as important levels before an all out free fall. But the trend is still higher on this timeframe. Moving further out to the monthly picture things are quite bullish still. That 8-year uptrend that shows up as the red line on the weekly chart takes on new meaning as the Hagopian Trigger Line for the very bullish Andrew’s Pitchfork.

On this time frame it takes a move below that to turn bearish. I can’t see anyone waiting that long before they start shorting. The price is currently holding a test at the Median Line and until it is at least mid way to the Lower Median Line there is no reason to try it short.

That looks to be around the 107.5 level in the near-term. But a move below 107.5 brings 100 and then 93-95, the Trigger Line into view. What is not talked about much though is that the bull flag on this monthly chart would trigger a Measured Move to 140 over the previous high. Innocent until proven guilty, Treasury Bonds are still in an uptrend.

Disclaimer: The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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