Tuesday, August 16, 2011

"What if Treasury Bonds Keep Rolling Over?" (TLT)

The iShares Barclay 20+ year Treasury ETF is up 3/4% at $105.29.
From All-Star Charts:
A lot of What If’s out there….
Yesterday we took a look at the Nasdaq100 and asked: What if, after closing right at former support, $QQQ rallies through what was supposed to be resistance? Well it did that today. The question now is how long can it hold onto those levels?
Let’s ask another question: Knowing that US Treasuries and Stocks are inversely correlated, what will happen to Stocks if US Treasury Bond Prices continue to rollover? It looks ugly up there, so how are stocks going to react?

The chart above shows Treasury Bond Prices ($TLT) breaking out of a long base at the beginning of the month and exploding higher. Well since the top last week at the peak of pessimism, the action in Bonds has been ugly. So if we’re trading stocks, and a lot of us are, we want to know whats next for Treasury Bond Prices....MORE
We were fortunate to catch the bulk of the 'exploding higher' move as part of a pair starting with July 26ths "Time to Attempt the Reverse Long Term Capital Management: Long Treasuries/Short Junk? (TLT; TMF; HYG; JNK)".

I won't keep you in suspense, a drop in the TLT would be very positive for stocks; psychologically as a 'risk on' signal and in a money flow sense as the hot money herd goes thundering off in search yummy trading opportunities.

HT: Abnormal Returns