US Treasury Bonds (via NASDAQ:TLT) took a knock down punch in November following the election. The fall from the blow brought them to a low in December as the referee started his count to 10. But like Rocky Balboa they still had some life left in them. They rose off the mat and started to show strength. That strength has been waning lately. Are they just catching their breathe, or is the age of the bull run catching up to them like the years are adding up for Sylvester Stallone (he turned 71 Thursday). The chart below gives some clues.
You can see the knock down punch as the gap down in November. And the 8 count as Bond prices consolidated in a range for over 4 months. Then the consolidation channel shifted into a rising channel, showing renewed strength. A false break out in April led to a pullback to a higher low and then a confirmed break higher in May. Since then Bonds had been flying. Until they reached the top of the channel 2 weeks ago.
Bonds have been pulling back since then and now sit at an important position. The pullback is retesting both the flat consolidation channel break out and the support base of the rising channel. This sets up two possible paths. One is a bounce at these support levels. With the price at the bottom of the Bollinger Bands® there is a case to be made for this path.
But momentum does not support this as both the RSI and MACD are bearish and falling. They support a continuation lower, down a path to higher rates and confirming a Dead Cat Bounce. Which will it be? Pay close attention to these support areas and see.
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